The journal entries to record the issuance, accrual of interest and premium amortization, payment of interest, and redemption of the bonds are provided. The entries include debits and credits for the various accounts involved in each transaction.
To record the issuance of the bonds, the journal entry would be:
Jan 1, 2022
- Debit: Cash ($500,000 x 103%)
- Credit: Bonds Payable ($500,000)
- Credit: Premium on Bonds Payable ($15,000)
To record the accrual of interest and premium amortization on December 31, 2022:
Dec 31, 2022
- Debit: Interest Expense ($500,000 x 6%)
- Credit: Premium on Bonds Payable ($15,000 x (1/30))
- Credit: Cash ($500,000 x 6%)
To record the payment of interest on January 1, 2023:
Jan 1, 2023
- Debit: Interest Expense ($500,000 x 6%)
- Debit: Premium on Bonds Payable ($15,000 x (29/30))
- Credit: Cash ($500,000 x 6%)
To record the redemption of the bonds at maturity:
Jan 1, 2052
- Debit: Bonds Payable ($500,000)
- Debit: Premium on Bonds Payable ($15,000)
- Credit: Cash ($500,000 + $500,000 x 6% x 30 years)
Complete Question :
Jameson company issued $500,000, 6%, 30-year bonds on january 1, 2022, at 103. Interest is payable annually on january 1. Jameson uses straight-line amortization for bond premium or discount.
Instructions
Prepare the journal entries to record the following events.
a. The issuance of the bonds.
b. The accrual of interest and the premium amortization on December 31, 2022.
c. The payment of interest on January 1, 2023.
d. The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.