1 answer

The Sarasota Company issued $310,000 of 10% bonds on January 1, 2020. The bonds are due...

Question:

The Sarasota Company issued $310,000 of 10% bonds on January 1, 2020. The bonds are due January 1, 2025, with interest payable each July 1 and January 1. The bonds were issued at 96.

Prepare the journal entries for (a) January 1, (b) July 1, and (c) December 31. Assume The Sarasota Company records straight-line amortization semiannually.


Answers

Straight line amortization means the discount or premium on bonds payable will be amortized each year equally based on number of years bond is outstanding
Journal entry to record bond issued
Date General Journal Debit Credit
1-Jan Cash (310,000*96%) $297,600
Discount on bonds payable (310,000-297,600) $12,400
    Bonds payable $310,000
(To record bonds payable issued)
1-Jul Interest expense (15,500+1,240) $16,740
    Discount on bonds payable (12,400/10) $1,240
    Cash (310,000*5%) $15,500
(To record interest on bonds)
31-Dec Interest expense (15,500+1,240) $16,740
    Discount on bonds payable (12,400/10) $1,240
    Cash (310,000*5%) $15,500
(To record interest on bonds)
.

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