Question

Question 1 (10 points) Problem A (10 points) Ripken Company issues $200,000 of 11%, 10-year bonds on January 1, 2003 at 103. Interest is payable semiannually on July 1 and January 1. Ripken Company uses straight-line for any amortization. I. Prepare journal entries for: a. Issuance of the bonds on January 1, 2003 Type Debit (hit return key) Type Credit, by spacing four to five spaces for each transaction in the problem. Leave a blank line between your transactions. b. Payment of interest on July 1, 2003 c. Accrual of interest on December 31, 2003 d. Payment of interest on January 1, 2004

Answer 1

$200,000 * 103% issue price of bonds face value of bonds premium on bonds payable semiannual periods semiannual premium amortization $206,000 $200,000 $6,000 $20 $300 10*2 $200,000*11%/2 semiannual interest payment semiannual premium amortization semiannual interest expense $11,000 $300 $10,700

date account titles and explanation debit credit January 1, 2003 $206,000 cash bonds payable premium on bonds payable (to record issuance of bonds) $200,000 $6,000 date account titles and explanation debit credit July 1, 2003 $10,700 $300 interest expense premium on bonds payable cash (to record payment of interest) $11,000

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date account titles and explanation debit credit $10,700 $300 December 31, 2003 interest expense premium on bonds payable interest payable (to record accrual of interest) $11,000 date account titles and explanation debit credit January 1, 2004 $11,000 interest payable cash (to record payment of interest) $11,000

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