Problem 10-8A Pronghorn Corporation sold $2,060 000,7% 5-year bonds on January 1

Question

Problem 10-8A Pronghorn Corporation sold $2,060 000,7% 5-year bonds on January 1 2017. The bonds were dated Ja Corporation uses the straight-line method to amortize bond premium or discount. ar 1,2017, and pay interest on January Pronghorn Prepare all the necessary journal entries to record the issuance of the bonds and bond interest expense for 2017, assuming that the bonds sold at 104. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1 Dec. 31 SHOW LIST OF ACCOUNTS

Explanation / Answer

Sold at 104 Jan-01 Cash 2142400      Bonds payable 2060000       premium on bonds payable 82400 Dec-31 Interest expense 127720 Premium on bonds payable 16480 =82400/5        Interest payable 144200 =2060000*7% Sold at 99 Jan-01 Cash 2039400 Discount on Bonds payable 20600      Bonds payable 2060000 Dec-31 Interest expense 148320        Discount on Bonds payable 4120 =20600/5        Interest payable 144200 1 Balance Sheet(Partial) Decemebr 31,2017 Current liabilities: Interest payable 144200 Long-term liabilities: Bonds payable 2060000 Add: Premium on bonds payable 65920 2125920 2 Balance Sheet(Partial) Decemebr 31,2017 Current liabilities: Interest payable 144200 Long-term liabilities: Bonds payable 2060000 Less: Discount on bonds payable 16480 2043520

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