Introduction: When bonds are issued at par, cash is debited and bonds payable is credited for the bond’s par value.Bonds are issued at a discount when the contract price is less than the market price, making the issue price less than par.
To determine: Prepare
Answer to Problem 8PSA
The time of issuance of bond on discount.
Explanation of Solution
Date | Particular | Debit | Credit |
01/01/2016 | Cash | ||
Discount on bonds payable | |||
Bonds payable | |||
(Being bonds sold at discount) |
Computation of discount is as follows:
Introduction: When bonds are issued at par, cash is debited and bonds payable is credited for the bond’s par value.Bonds are issued at a discount when the contract price is less than the market price, making the issue price less than par.
To determine: Total bond interest expenses to be recognized over the bonds life.
Answer to Problem 8PSA
The total bond interest expense to be recognized over the life of bond is
Explanation of Solution
Introduction: When bonds are issued at par, cash is debited and bonds payable is credited for the bond’s par value.Bonds are issued at a discount when the contract price is less than the market price, making the issue price less than par.
To determine: First two years amortization table.
Answer to Problem 8PSA
First two years amortization table, amount check is
Explanation of Solution
Semi Annual Period End | Unamortized Discount | Carrying Value |
01/0 1/2016 | ||
06/30/2016 | ||
12/31/2016 | ||
06/30/2017 | ||
12/31/2017 | ||
30/06/2018 | ||
31/12/2018 | ||
30/06/2019 | ||
31/12/2019 |
Straight-line discount amortization =
=
Introduction: When bonds are issued at par, cash is debited and bonds payable is credited for the bond’s par value.Bonds are issued at a discount when the contract price is less than the market price, making the issue price less than par.
To determine: Prepare Journal Entry.
Answer to Problem 8PSA
Journal Entries of First two interest payment
Explanation of Solution
Date | Particular | Debit | Credit |
30/06/2016 | Interest Expense | ||
Discount on bonds payable | |||
Cash | |||
(Being semiannual interest paid and discount on bonds amortized) | |||
31/12/2016 | Interest Expense | ||
Discount on bonds payable | |||
Cash | |||
(Being semiannual interest paid and discount on bonds amortized) |
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Chapter 10 Solutions
Financial Accounting: Information for Decisions
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