Chapter 11

Topics: 2007, 1920, 1982, Generally Accepted Accounting Principles / Pages: 3 (505 words) / Published: Nov 15th, 2011
Joseph Company issued $800,000, 11%, 10-year bonds on December 31, 2007, for $730,000. Interest is payable semiannually on June 30 and December 31. Joseph Company uses the straight-line method to amortize bond premium or discount.

Instructions Prepare the journal entries to record the following. The issuance of the bonds. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.) The payment of interest and the discount amortization on June 30, 2008. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3,

2.) The payment of interest and the discount amortization on December 31, 2008. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3,

2.) The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.

(a) 2007 Dec. 31 Cash 730,000 Discount on Bonds Payable 70,000 Bonds Payable 800,000

(b) 2008 June 30 Bond Interest Expense 47,500 Cash ($800,000 X 11% X 1/2) 44,000 Discount on Bonds Payable 3,500 ($70,000 ÷ 20)

(c) 2008 Dec. 31 Bond Interest Expense 47,500 Cash ($800,000 X 11% X 1/2) 44,000 Discount on Bonds Payable 3,500

(d) 2017 Dec. 31 Bonds Payable 800,000 Cash 800,000

On May 1, 2008, Newby Corp. issued $600,000, 9%, 5-year bonds at face value. The bonds were dated May 1, 2008, and pay interest semiannually on May 1 and November 1. Financial statements are prepared annually on December 31. Prepare the journal entry to record the issuance of the bonds. Prepare the adjusting entry to record the accrual of interest on December 31, 2008. Show the balance sheet presentation on December 31, 2008. current liabiliteis, long term liablitities Prepare the journal entry to record payment of interest on May 1, 2009, assuming no accrual of interest from January 1, 2009, to May 1, 2009. (For multiple debit/credit

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