On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7%

Question

On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7% bonds for $1,050,000, with interest payable semiannually. Orange Inc. purchased the bonds on the issue date for the issue price. Prepare entries to record the following transactions for the current fiscal year.

Required:

A)

B)

Second semiannual interest payment on December 31. Refer to the Chart of Accounts for exact wording of account titles.  This Journal should have 2 rows, be sure to include correct dates as well.

C

Amortization of bond discount/premium, using the straight-line method of amortization, on July 1. Refer to the Chart of Accounts for exact wording of account titles. This Journal should have 2 rows, be sure to include correct dates as well.

Chart of Accounts.

Issuance of the bonds on January 1. Refer to the Chart of Accounts for exact wording of account titles. This Jounral should have 3 rows, be sure to include correct dates as well.

Explanation / Answer

The following are the required journal entries:

note: amortisation under straight line method will be for 10 year * 2 semi annual period each

=>20 semi annual period.

premium amount = $1,050,000 - 1,000,000 =>$50,000.

amount = $50,000 / 20 =.$2,500 for each semi annual period.

Date general journal debit credit January 1 Cash a/c $1,050,000 .....To Bonds payable a/c $1,000,000 .....To premium on bonds payable a/c $50,000 December 31 Interest expense a/c $35,000 ..........To cash a/c $35,000 (amount = $1,000,000*7% *6/12 =>$35,000) July 1 Premium on bonds payable a/c $2,500 ..........To Interest expense a/c $2,500 (amount = $50,000 * (1/20) =>$2,500

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.