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ACC 291 WileyPLUS Week 3 Assignment Problem P10-9A

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ACC 291 WileyPLUS Week 3 Assignment Problem P10-9A
Elkins Company sold $2,500,000, 8%, 10-year bonds on July 1, 2011. The bonds were dated
July 1, 2011, and pay interest July 1 and January 1. Elkins Company uses the straight-line
method to amortize bond premium or discount. Assume no interest is accrued on June 30.
Correct.
Prepare all the necessary journal entries to record the issuance of the bonds and bond interest
expense for 2011, assuming that the bonds sold at 104. (For multiple debit/credit entries, list
amounts from largest to smallest e.g. 10, 5, 3, 2.)
Date Account/Description Debit Credit
July 1 Cash 2600000
Bonds payable 2500000
Premium on bonds payable 100000
Dec. 31 Bond interest expense 95000
Premium on bonds payable 5000
Bond interest payable 100000
Correct.
Date Account/Description Debit Credit
July 1 Cash ($2,500,000 × 104%) 2,600,000
Bonds payable 2,500,000
Premium on bonds payable 100,000
Dec. 31 Bond interest expense 95,000
Premium on bonds payable ($100,000 ÷ 20) 5,000
Bond interest payable ($2,500,000 × 8% ×
1/2)
100,000

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Prepare journal entries as in the previous part of the question assuming that the bonds sold at
98. (For multiple debit/credit entries, list amounts from largest to smallest e.g. 10, 5, 3, 2.)
Date Account/Description Debit Credit
July 1 Cash 2450000
Discount on bonds payable 50000
Bonds payable 2500000
Dec. 31 Bond interest expense 102500
Bond interest payable 100000
Discount on bonds payable 2500
Correct.
Date Account/Description Debit Credit
July 1 Cash ($2,500,000 × 98%) 2,450,000
Discount on bonds payable 50,000
Bonds payable 2,500,000
Dec. 31 Bond interest expense 102,500
Bonds interest payable ($2,500,000 × 8% ×
1/2)
100,000
Discount on bond payable ($50,000 ÷ 20) 2,500
Show balance sheet presentation for each bond issue at December 31, 2011. (Enter all amounts
as positive amounts and subtract where necessary.)
Premium
Long-term Liabilities
Bonds payable, due 2021 $ 2,500,000
Add: Premium on bonds payable
95,000
$ 2,595,000
Discount
Long-term Liabilities
Bonds payable, due 2021 $ 2,500,000
Less: Discount on bonds payable
47,500
2,452,500

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