On March 1, 2012, Bob\'s Allen-wrench Company issues $2,000,000 of 9%, 10-year b
ID: 2585134 • Letter: O
Question
On March 1, 2012, Bob's Allen-wrench Company issues $2,000,000 of 9%, 10-year bonds, with interest payments made each Sept. 1 and March 1. The bonds are issued at 103. Bob's Allen-wrench Company amortizes any premium or discount using the straight-line method. (3) a Prepare the journal entry on Sept. 1,2012 to record the payment of interest and the amortization of any discount or premium. b Prepare the journal entry on December 31,2012 to record accrued interest and the amortization of any discount or premium. Prepare the journal entry on March 1, 2013 What is the carrying value of the bonds on March 1, 2013. d.Explanation / Answer
Bond issue $2,000,000 Bond issue price $103 Number of bonds 20000 Bond Premium=(20000*3) $60,000 Journal entry on Maech1, 2012 will be to debit cash by $2060000, credit bond payable by $2000000 And Creditby premium on bonds payable $60000 This premium amount will be amortized in 20 sixmonthly period ($60000/20=)$3000 in each period JOURNAL ENTRY a Date Account Title and explanation Debit Credit Sept.1, 2012 Bond Interest Expense $87,000 ((2000000*0.09)/2)-3000) Premium on bonds payable $3,000 Cash $90,000 (200000*0.09)/2 (To record periodic bond interest payment and premium amortization) b Dec.31, 2012 Bond Interest Expense $58,000 (four months interest minus amortization of $2000) (90000*(4/6))-2000) Premium on bonds payable $2,000 Interest payable $60,000 (2000000*0.09)*(4/12) (To record bond interest accrued and premium amortization) c March 1, 2012 Bond Interest Expense $29,000 (Two months interest minus amortization for two months($1000) Premium on bonds payable $1,000 Interest payable $60,000 Cash $90,000 (200000*0.09)/2 (To record bond interest payment and premium amortization) d Carrying value of Bond on March 1: Bonds face value $2,000,000 Unamortized premium $54,000 (60000-6000) Carrying value of Bond on March 1: $2,054,000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.