Exhibit 14-12 On January 1, 2016, Jewels, Inc. sold $200,000 of its 12% five-yea

Question

Exhibit 14-12

On January 1, 2016, Jewels, Inc. sold $200,000 of its 12% five-year bonds to yield 10%. Interest is paid each January 1 and July 1, and effective interest amortization is used. On May 1, 2018, Jewels, retired $100,000 of the bonds at 104. The book value of the bonds on December 31, 2017, was $212,926.

Refer to Exhibit 14-12. Which of the following would be included in the interest accrual entry on May 1, 2018?

a.

credit to Interest Payable for $3,333

b.

debit to Bond Interest Expense for $3,549

c.

credit to Discount on Bonds Payable for $4,259

d.

debit to Premium on Bonds Payable for $451

Refer to Exhibit 14-12. The entry to record the retirement in May, 2018 would include a

a.

credit to Cash for $104,000.

b.

debit to Interest Expense for $8,000.

c.

credit to Premium on Bonds Payable for $12,926.

d.

debit to Loss on Bond Retirement for $4,024 (rounded).

a.

credit to Interest Payable for $3,333

b.

debit to Bond Interest Expense for $3,549

c.

credit to Discount on Bonds Payable for $4,259

d.

debit to Premium on Bonds Payable for $451

Explanation / Answer

Journal entry : Interest accural entry :

so answer is b and C

Journal entry :

so answer si a) credit to Cash for $104,000.

Date accounts & explanation debit Credit May 1,2018 Interest expense (106463*10%*4/12) 3549 Premium on bonds Payable 451 Interest payable (100000*12%*4/12) 4000 (To record interest accured)

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