# Aggies Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018, and received$540,000. Interest is payable semi-annually. The premium is amortized using the straight-line method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. Dec. 31, 2018: entry to record payment of interest to bondholders C. Dec. 31, 2018: entry to record amortization of premium

FindFindarrow_forward

### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

#### Solutions

Chapter
Section
FindFindarrow_forward

### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 13, Problem 6PA
Textbook Problem
1 views

## Aggies Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018, and received$540,000. Interest is payable semi-annually. The premium is amortized using the straight-line method. Prepare journal entries for the following transactions.A. July 1, 2018: entry to record issuing the bondsB. Dec. 31, 2018: entry to record payment of interest to bondholdersC. Dec. 31, 2018: entry to record amortization of premium

To determine

Introduction:

Journal entries record business transactions. These transactions have double effect on accounts such that total of all assets equate with liabilities and equities.

To prepare:

Journal entries for the given transactions.

### Explanation of Solution

Record issuance of bond:

 Date Account Debit ($) Credit ($) July 1, 2018 Cash 540,000 Premium on bond payable 40,000 Bond payable 500,000 (To record issuance of bond.)

Table (1)

• Cash is an asset and it is increased by $540,000. Therefore, cash is debited with$540,000.
• Premium on bond payable is a contra liability account and it is decreased by $40,000. Therefore, premium on bond payable is credited with$40,000.
• Bond payable is a liabilty account and it is increased by $500,000. Therefore, bond payable is credited with$500,000.

Record interest expense:

 Date Account Debit ($) Credit ($) Dec 31, 2018 Interest Expense (\$500,000×5%) 25,000 Cash 25,000 (To record interest expense on bonds payable

### Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

#### The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Find more solutions based on key concepts
Which adjusting entries are reversed by ToyJoy?

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

Why might an auditor use a program flowchart?

Accounting Information Systems

How often must an employer file Form 941?

PAYROLL ACCT.,2019 ED.(LL)-TEXT

If the United States imports more goods from abroad than it exports, foreigners will tend to have a surplus of ...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Define the term marketing

MKTG 12:STUDENT ED.-TEXT

What are the arguments for increased social responsibility?

Foundations of Business (MindTap Course List)