Question

Wildhorse Co. issued $513,000,7%, 30-year bonds on January 1, 2022, at 105. Interest is payable annually on January 1. Wildhorse uses straight line amortization for bond premium or discount Prepare the journal entries to record the following events. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) (a) (b) (c) (d) The issuance of the bonds The accrual of interest and the premium amortization on December 31, 2022. The payment of interest on January 1, 2023. The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded No. Date Account Titles and Explanation Debit Credit

Answer 1

Solution:

Journal Entries
No.	Date	Particulars	Debit	Credit
a	01-Jan-22	Cash Dr ($513,000*105%)	$5,38,650
		To Premium on Bond Payable		$25,650
		To Bond Payable		$5,13,000
		(To record issuance of bond)
b	31-Dec-22	Interest Expense Dr	$35,055
		Premium on Bond payable Dr ($25,650/30)	$855
		To Interest payable ($513,000*7%)		$35,910
		(To record accrual of Interest and Amorization of premium on issue)
c	01-Jan-23	Interest payable Dr	$35,910
		To Cash		$35,910
		(To record Interest payment)
d	01-Jan-52	Bond Payable Dr	$5,13,000
		To Cash		$5,13,000
		(To record retirement of the bond at maturity)