Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method

Daan Corporation wholesales repair products to equipment manufacturers. On April 1, 2014, Daan Corporation issued $3,600,000 of 10-year, 12% bonds at a market (effective) interest rate of 10%, receiving cash of $4,048,640. Interest is payable semiannually on April 1 and October 1.

Hide
a. Journalize the entry to record the issuance of bonds on April 1, 2014. For a compound transaction, if an amount box does not require an entry, leave it blank.

Bonds Payable

Cash

Discount on Bonds Payable

Interest Expense

Interest Payable

Premium on Bonds Payable

Correct 2 of Item 1

Correct 3 of Item 1

Correct 4 of Item 1

Accounts Payable

Cash

Discount on Bonds Payable

Interest Expense

Interest Payable

Premium on Bonds Payable

Correct 5 of Item 1

Correct 6 of Item 1

Correct 7 of Item 1

Accounts Payable

Bonds Payable

Cash

Discount on Bonds Payable

Interest Expense

Interest Payable

Correct 8 of Item 1

Correct 9 of Item 1

Correct 10 of Item 1

Entries for Issuing Bonds and Amortizing Premium b

Hide FeedbackShow All Feedback

Check My Work Feedback

Post Submission Feedback

Solution

Hide
b. Journalize the entry to record the first interest payment on October 1, 2014, and amortization of bond premium for six months, using the straight-line method. (Round to the nearest dollar.) For a compound transaction, if an amount box does not require an entry, leave it blank.

Bonds Payable

Cash

Discount on Bonds Payable

Interest Expense

Interest Payable

Interest Receivable

Correct 2 of Item 2

Correct 3 of Item 2

Correct 4 of Item 2

Bonds Payable

Cash

Discount on Bonds Payable

Interest Payable

Interest Receivable

Premium on Bonds Payable

Correct 5 of Item 2

Correct 6 of Item 2

Correct 7 of Item 2

Bonds Payable

Cash

Discount on Bonds Payable

Interest Expense

Interest Payable

Premium on Bonds Payable

Correct 8 of Item 2

Correct 9 of Item 2