Instr uctor :
Course:
A6
Name:
PAOLA ORPELLA MONTANÉ
Date:
Financial Ac counting, Sixth Edition by Kimmel, Weygandt, an d Kieso
Primer on Using Excel in Accounting by Rex A Schildhouse
P10-8A, Prepare jou rnal entries to record issu ance of bonds, interest, and strai ght-line amortization, and balance
sheet presentation .
Wong Corporation sold
$2.000.000
7%
5
-year bonds on January 1, 2012. The
bonds were dated January 1, 2012, and pay interest on January 1. Wong Corporation uses the straight-line method to
amortize bond premium or discount.
Instru ctions:
(a) Prepare all the necessary journal entries to record the issuance of the bonds and bond interest expense
for 2012, assuming that the bonds sold at
102
ene 1
Cash
2.040.000
Bonds Payable
2.000.000
Bond interest expense
132.000
Premium on bonds payable
40.000
(2000000*102/100=2040000)……(2040000-2000000=40000)
Premium on bonds payable
8.000
Interest payable
140.000
dic 31
ene 1
Cash
1.940.000
2.000.000
(IP=2000000*7%=140000)….(PBP =40000/4=8000)
(b) Prepare journal entries as in part (a) assuming that the bonds sold at
97
Discounts on bonds payable
60.000
Bonds payable
dic 31
Bond interest expense
152.000
Discounts on bonds payable
12.000
Interest payable
140.000
(60000/5=12000)
(c) Show the balance sheet presentation for the bond issue at December 31, 2012, using
(1) the 102 selling price
Current Liabilities
Interest payable
$140.000
Long-term Liabilities
Bonds payable
$2.000.000
Add premium on bonds payable
8.000
$2.008.000
$1.988.000
(2) the 97 selling price.
Current Liabilities
Interest payable
$14.000
Long-term Liabilities
Bonds payable
$2.000.000
less discount on bonds payable
12.000
