Walker Corporation issued 8%, five-year bonds with a par value of $5,500,000 on
ID: 2583437 • Letter: W
Question
Walker Corporation issued 8%, five-year bonds with a par value of $5,500,000 on January 1, 2017. Interest is to be paid semiannually on each June 30 and December 31. The bonds were issued at $5,250,000 cash. (a) Prepare the general journal entry to record the issuance of the bonds on January 1, 2017. (b) Show how the bonds would be reported on Walker's balance sheet at January 1, 2017. (c) Assume instead that Walker uses the straight-line method for amortizing any discount or premium on bonds. Prepare the general journal entry to record the first semiannual interest payment on June 30, 2017. (d) Prepare the journal entry to retire the bonds on June 30, 2019 for $5,350,000Walker Corporation issued 8%, five-year bonds with a par value of $5,500,000 on January 1, 2017. Interest is to be paid semiannually on each June 30 and December 31. The bonds were issued at $5,250,000 cash. (a) Prepare the general journal entry to record the issuance of the bonds on January 1, 2017. (b) Show how the bonds would be reported on Walker's balance sheet at January 1, 2017. (c) Assume instead that Walker uses the straight-line method for amortizing any discount or premium on bonds. Prepare the general journal entry to record the first semiannual interest payment on June 30, 2017. (d) Prepare the journal entry to retire the bonds on June 30, 2019 for $5,350,000
Walker Corporation issued 8%, five-year bonds with a par value of $5,500,000 on January 1, 2017. Interest is to be paid semiannually on each June 30 and December 31. The bonds were issued at $5,250,000 cash. (a) Prepare the general journal entry to record the issuance of the bonds on January 1, 2017. (b) Show how the bonds would be reported on Walker's balance sheet at January 1, 2017. (c) Assume instead that Walker uses the straight-line method for amortizing any discount or premium on bonds. Prepare the general journal entry to record the first semiannual interest payment on June 30, 2017. (d) Prepare the journal entry to retire the bonds on June 30, 2019 for $5,350,000
Explanation / Answer
(a) Journal Entry to record the issuance of the bonds on January1, 2017:
Bank / Cash A/C-------------------------------------------------------Dr. 5,250,000
Discount On Bonds payable A/C-------------------------------------Dr. 250,000
To 8% Bonds Payable A/C 5,500,000
(b) AN EXTRACT OF BALANCE SHEET(as at January1,2017)
(c) Journal Entry to record the first semiannual interest payment on June 30,2017:
Interest Expense A/C------------------------------------------------------Dr. 245,000
To Discount On Bonds Payable A/C 25,000
To Cash / Bank A/C 220,000
Note: 1. Amortizing amount of discount payable is calculated b dividing total amount of discount by the life of the bond i.e. 250,000 / 5 = 50,000 per year = 25,000 per half year.
2. Interest on bonds payable on June 30,2017 = 5,500,000 * 8/100 * 6/12 = 220,000
(d) Journal entry to retire the bonds on June 30,2019:
8% Bonds payable A/C-----------------------------------------------------Dr. 5,500,000
LossOn Retirement Of Bonds A/C---------------------------------------Dr. 125,000
To Cash/ Bank A/C 5,350,000
To Gain On Retirement Of Bonds A/C 150,000
To Discount on Bonds A/C 125,000
LIABILITIES AMOUNT($) ASSETS AMOUNT($) 8% BONDSpayable (par value of $5,500,000) 5,250,000 Discount on Issue of Bonds payable 250,000Related Questions
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