Whitmore Company issued $500,000 or 5-year, 8% bonds at 97 on January 1, 2019, T

Question

Whitmore Company issued $500,000 or 5-year, 8% bonds at 97 on January 1, 2019, The bonds pay interest annually. 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 Compute the total cost of borrowing for these bonds. Total cost of borrowing s 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 Credit Compute the total cost of borrowing for these bonds, assuming the bonds were sued 105. Total cost or borrowing s

Explanation / Answer

1 Cash 485000 =500000*0.97 Discount on bonds payable 15000        Bonds payable 500000 Annual interest over life of bonds 200000 =500000*8%*5 Principal repayment 500000 Less: Amount received 485000 Total cost of borrowing 215000 2 Cash 525000 =500000*1.05        Premium on bonds payable 25000        Bonds payable 500000 Semi-annual interest over life of bonds 200000 Principal repayment 500000 Less: Amount received 525000 Total cost of borrowing 175000

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