Question

Exercise 14-04 Sandhill Company issued $528,000 of 9%, 20-year bonds on January 1, 2020, at 103. Interest is payable semiannually on July 1 and January 1. Sandhill Company uses the straight-line method of amortization for bond premium or discount. Prepare the journal entries to record the following. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) (a) The issuance of the bonds. (b) The payment of interest and the related amortization on July 1, 2020. (c) The accrual of interest and the related amortization on December 31, 2020. Date Account Titles and Explanation Debit Credit 1/1/20 enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount enter an account title for the journal entry on January 1 enter a debit amount enter a credit amount 7/1/20 enter an account title for the journal entry on July 1 enter a debit amount enter a credit amount enter an account title for the journal entry on July 1 enter a debit amount enter a credit amount enter an account title for the journal entry on July 1 enter a debit amount enter a credit amount 12/31/20 enter an account title for the journal entry on December 31 enter a debit amount enter a credit amount enter an account title for the journal entry on December 31 enter a debit amount enter a credit amount enter an account title for the journal entry on December 31 enter a debit amount enter a credit amount SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO VIDEO Question Attempts: 0 of 3 used SAVE FOR LATER SUBMIT ANSWER

Answer 1

Date	Account Titles and Explanation	Debit	Credit
1/1/20	Cash	$543,840
	Bonds payable		$528,000
	Premium on bonds payable		$15,840
	( To record bond issue)
7/1/20	Interest expense	$23,364
	Premium on bonds payable	$396
	Cash		$23,760
	( To record semi annual interest payment)
12/31/20	Interest expense	$23,364
	Premium on bonds payable	$396
	Cash		$23,760
	( To record semi annual interest payment)

Par value of bonds = $528,000

Cash receipts from issue of bonds = 528,000 x 103%

= $543,840

Premium on bonds payable = Cash receipts from issue of bonds - Par value of bonds

= 543,840-528,000

= $15,840

Semi annual amortization of bonds premium = 15,840/40

= $396

Semi annual interest payment = 528,000 x 9% x 6/12

= $23,760

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