actice Assignment Gradebook ORION Downloadable eTextbook nment Pueblo Company is

Question

actice Assignment Gradebook ORION Downloadable eTextbook nment Pueblo Company issued €500,000 of 5-year, 8% bonds at 97 on January 1, 2017, The bonds pay interest annually. (1) Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit (2) Compute the total cost of borrowing for these bonds. Total cost of borrowing (1) Prepare the journal entry to record the issuance of the bonds, assuming the bonds were issued at 105. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit (2) Compute the total cost of borrowing for these bonds, assuming the bonds were issued at 105. Total cost of borrowing All Rights Reserved. A Division of John wiley & Sons. Inc

Explanation / Answer

1) Account titles & Explanations Debit Credit Cash (500,000*.97) 485000 discount on bonds 15000 bonds payable 500,000 2) cost of borrowing total interest payments (500,000*8%)*5 200000 Add:discount on bonds 15,000 total cost of borrowing 215000 1) Account titles & Explanations Debit Credit Cash (500,000*1.05) 525000 premium on bonds 25,000 bonds payable 500,000 2) cost of borrowing total interest payments (500,000*8%)*5 200000 less :Premium on bonds 15,000 total cost of borrowing 185000

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