Question

Celine Dion Company issued $600,000 of 10%, 20-year bonds on Juanuary 1, 2017, at 102. Interest is payable semiannually on July 1 and January 1. Dion Company uses the effective-interest method of amortization for bond premium or discount. Effective yield of 9.7705%

Instructions: Prepare the journal entries to record the following (round to the nearest dollar)

a). The issuance of the bonds

b) The payment of interest and the related amortization on July 1, 2017

c) The accrual of interest and the related amortization on December 31, 2017

Answer 1

Date Issue Entry 1. Record the Bond Issue General Journal Debit Credit Jan-01 Cash (600000*1.02) 612000 Premium on Bonds Payable 12000 Bonds Payable 600000 Record the issue of the Bond with Premium Date Record the interest Payment Record the interest Paymnet and amotization General Journal Debit Credit Jul-01 Interest Expenses (612000*9.7705*6/12) 29898 Premium on Bonds Payable 102 Cash (600000 10%*6/12) 30000 Record the interest Paymnet and amotization Date Record the interest Expenses Adjustment and amotization General Journal Debit Credit Dec-31 Interest Expenses 29893 Premium on Bonds Payable 107 Interest Payables 30000 Record the Accrues interest and amotization Cash interest =600000*10%*6/12 30000 Bondinterest Expenses = 612000*9.7705%*6/12 29898 Bond interest Expenses 2and Yesr (612000- 102)*9.7705%*6/12 29893