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ygahdt, Financial Accounting, 9e FINANCIAL ACCOUNTING-Undergrad (33 010 272) cti

ID: 2598534 • Letter: Y

Question

ygahdt, Financial Accounting, 9e FINANCIAL ACCOUNTING-Undergrad (33 010 272) ctice Gradebook ORION Downloadable eTextbook nment PRINTER Exercise 10-21 Gridley Company issued $736,000 12% 10-year bonds on December 31, 2014 for S713S20 Interest method to amortize bond premium or discount. eeyalle se man aly June 30, d Dee tera Gr le Co imum i e- o- 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-) Date Account Titles and Credit Dec. 31, 2014 account titfes are automatically Indented when amount is entered D to record the payment of interest and the discount amortization on Me 30, 2015. (Ondr account .resan . Prepare te journal en not indent manually Account Titles and June 30, 2015 424.33 Prepare the journal entry to record the payment of interest and the discount amortization on December 31, 2015.(Credit account cibles are automatically indented when amount is entered not indent manuallv.)

Explanation / Answer

1. Journal Entries for Bonds

Date

Account

Debit

Credit

Dec 31 2014

Cash

Discount on Bonds Payable

TO Bonds Payable

713,920

22,080

736,000

June 30 2015

Interest Expense (736,000 x 6%)

TO Discounts on bonds payable

TO Cash

44,160

1,104

44,160

Dec 31 2015

Interest Expense (736,000 x 6%)

TO Discounts on bonds payable

TO Cash

44,160

1,104

44,160

Dec 31 2024

Bonds Payable

TO Cash

736,000

736,000

Note: Calculation of discount amortization on each interest payment date.

Total Discount to be amortized = 22,080

Number of installments of interest = 10year x 2 semi-annual = 20 instalments

Amortization of discount on each interest payment date = 22,080 / 20 = $1,104

Date

Account

Debit

Credit

Dec 31 2014

Cash

Discount on Bonds Payable

TO Bonds Payable

713,920

22,080

736,000

June 30 2015

Interest Expense (736,000 x 6%)

TO Discounts on bonds payable

TO Cash

44,160

1,104

44,160

Dec 31 2015

Interest Expense (736,000 x 6%)

TO Discounts on bonds payable

TO Cash

44,160

1,104

44,160

Dec 31 2024

Bonds Payable

TO Cash

736,000

736,000