Monday, 17 March 2014

Simko Company issued \$600,000, 10-year, 5 percent bonds on January 1, 2009. The bonds were issued for \$580,000. Interest is payable annually on December 31. Required: Using straight-line amortization, prepare journal entries to record (a) the bond issuance on January 1, 2009, and (b) the payment of interest on December 31, 2009. (Omit the "\$" sign in your response.) Date General Journal Debit Credit Jan. 1 2009 Cash Discount on bonds payable Bonds payable Dec. 31 2009 Interest expense Discount on bonds payable Cash ________________________________________ Explanation: Dec. 31 2009: Interest Expense: (\$30,000 + \$2,000) = 32,000 Discount on Bonds Payable: (\$20,000 ÷ 10 years = \$2,000 per year) Cash: (\$600,000 × 5% × 12/12) = 30,000

 Simko Company issued \$600,000, 10-year, 5 percent bonds on January 1, 2009. The bonds were issued for \$580,000. Interest is payable annually on December 31.

 Required: Using straight-line amortization, prepare journal entries to record (a) the bond issuance on January 1, 2009, and (b) the payment of interest on December 31, 2009. (Omit the "\$" sign in your response.)

 Date General Journal Debit Credit Jan. 1 2009 Cash Discount on bonds payable Bonds payable Dec. 31 2009 Interest expense Discount on bonds payable Cash

Explanation:

 Dec. 31 2009: Interest Expense: (\$30,000 + \$2,000) = 32,000 Discount on Bonds Payable: (\$20,000 ÷ 10 years = \$2,000 per year) Cash: (\$600,000 × 5% × 12/12) = 30,000