On January 1, 2019, Gates Corporation issued $100,000 of 5-year bonds due December 31, 2023, for $103,604.79 minus debt issuance costs of $3,000. The bonds carry a stated rate of interest of 13% payable annually on December 31 and were issued to yield 12%. The company uses the effective interest method of amortization to amortize any discounts or premiums and the straight-line method to amortize the debt issuance costs. Required: Prepare the journal entries to record the issuance of the bonds, all the interest payments, premium amortizations, debt issuance cost amortizations, and the repayment of the bonds. In addition, prepare a bond interest expense and premium amortization schedule for the bonds.
On January 1, 2019, Gates Corporation issued $100,000 of 5-year bonds due December 31, 2023, for $103,604.79 minus debt issuance costs of $3,000. The bonds carry a stated rate of interest of 13% payable annually on December 31 and were issued to yield 12%. The company uses the effective interest method of amortization to amortize any discounts or premiums and the straight-line method to amortize the debt issuance costs. Required: Prepare the journal entries to record the issuance of the bonds, all the interest payments, premium amortizations, debt issuance cost amortizations, and the repayment of the bonds. In addition, prepare a bond interest expense and premium amortization schedule for the bonds.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable
Section: Chapter Questions
Problem 16E
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Question
On January 1, 2019, Gates Corporation issued $100,000 of 5-year bonds due December 31, 2023, for $103,604.79 minus debt issuance costs of $3,000. The bonds carry a stated rate of interest of 13% payable annually on December 31 and were issued to yield 12%. The company uses the effective interest method of amortization to amortize any discounts or premiums and the straight-line method to amortize the debt issuance costs.
Required:
| Prepare the |
CHART OF ACCOUNTS
Gates CorporationGeneral Ledger
| ASSETS | |
| 111 | Cash |
| 121 | |
| 141 | Inventory |
| 152 | Prepaid Insurance |
| 181 | Equipment |
| 195 | Deferred Debt Issuance Costs |
| 198 |
| LIABILITIES | |
| 211 | Accounts Payable |
| 231 | Salaries Payable |
| 250 | Unearned Revenue |
| 255 | Bonds Payable |
| 256 | Premium on Bonds Payable |
| 257 | Discount on Bonds Payable |
| 261 | Income Taxes Payable |
| EQUITY | |
| 311 | Common Stock |
| 331 |
| REVENUE | |
| 411 | Sales Revenue |
| EXPENSES | |
| 500 | Cost of Goods Sold |
| 511 | Insurance Expense |
| 512 | Utilities Expense |
| 521 | Salaries Expense |
| 532 | |
| 540 | Interest Expense |
| 541 | Depreciation Expense |
| 559 | Miscellaneous Expenses |
| 910 | Income Tax Expense |
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