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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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ExerciseNoninterest-Bearing Bonds (Straight Line)

Dean Plumbing issues $1,000,000 face value, noninterest-bearing bonds on January 1, 2021. The bonds are issued at 65 and mature on December 31, 2024.

Required:

Assuming the straight-line amortization method is followed, prepare the journal entry on December 31, 2023.

To determine

Concept introduction:

Bonds:

Bonds are debt instruments issued by the borrower company to its lenders. Bonds are issued at a specified rate of interest and for a specified time period. The bondholders get a fixed rate of interest on the bonds and repayment of the bonds at the maturity date.

Amortization of Bonds premium or discount:

Bonds may be issued at a premium or discount. The premium or discount on issue of binds is amortized or the life of bonds using the straight line or effective rate methods.

To prepare:

The journal entry as on Dec. 31, 2023.

Explanation

The journal entry as on Dec. 31, 2023 is explained as follows:

Journal Entries
Date Account Titles Debit Credit
Dec...

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