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. CHART OF ACCOUNTS Gates Corporation General Ledger ASSETS 111 Cash 121 Accounts Receivable 141 Inventory 152 Prepaid Insurance 181 Equipment 195 Deferred Debt Issuance Costs 198 Accumulated Depreciation 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 Retained Earnings PAGE 2019PAGE 2020PAGE 2021PAGE 2022PAGE 2023 GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT 1 2 3 4 5 6 7 8 9 10

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

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 7RE: Refer to the information in RE13-5. Assume that on December 31, 2019, the investment in Smith...

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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.

CHART OF ACCOUNTS

Gates Corporation

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
195	Deferred Debt Issuance Costs
198	Accumulated Depreciation

	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	Retained Earnings

PAGE 2019PAGE 2020PAGE 2021PAGE 2022PAGE 2023

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10

1. 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.
General Journal Instructions
PAGE 2019
PAGE 2020
PAGE 2021
PAGE 2022
PAGE 2023
GENERAL JOURNAL
DATE
ACCOUNT TITLE
POST. REF.
DEBIT
CREDIT
1
3
4
5
6
7
8
9
10
2.

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