exercise 14 - 3 (algo) recording bond issuance and interest lo p1\non january 1, boston enterprises issues…

exercise 14 - 3 (algo) recording bond issuance and interest lo p1\non january 1, boston enterprises issues bonds that have a $2,150,000 par value, mature in 20 years, and pay 6% interest semiannually on june 30 and december 31. the bonds are sold at par.\ncomplete this question by entering your answers in the tabs below.\nrequired 1 required 2 required 3\nprepare the journal entry for issuance assuming the bonds are issued at (a) 97 and (b) 103.\nview transaction list\njournal entry worksheet\n1 2\nrecord the issue of bonds at 97.\nnote: enter debits before credits.\ndate general journal debit credit\njanuary 01

exercise 14 - 3 (algo) recording bond issuance and interest lo p1\non january 1, boston enterprises issues bonds that have a $2,150,000 par value, mature in 20 years, and pay 6% interest semiannually on june 30 and december 31. the bonds are sold at par.\ncomplete this question by entering your answers in the tabs below.\nrequired 1 required 2 required 3\nprepare the journal entry for issuance assuming the bonds are issued at (a) 97 and (b) 103.\nview transaction list\njournal entry worksheet\n1 2\nrecord the issue of bonds at 97.\nnote: enter debits before credits.\ndate general journal debit credit\njanuary 01

Answer

Explanation:

Step1: Calculate issue price when issued at 97

The par - value of the bonds is $2,150,000. When issued at 97, the issue price is $2,150,000×0.97 = $2,085,500. The discount on bonds payable is $2,150,000 - $2,085,500=$64,500.

Step2: Record journal entry for bonds issued at 97

Debit Cash for the amount received ($2,085,500), debit Discount on Bonds Payable for the discount amount ($64,500), and credit Bonds Payable for the par - value ($2,150,000).

Step3: Calculate issue price when issued at 103

When issued at 103, the issue price is $2,150,000×1.03 = $2,214,500. The premium on bonds payable is $2,214,500 - $2,150,000 = $64,500.

Step4: Record journal entry for bonds issued at 103

Debit Cash for the amount received ($2,214,500), credit Premium on Bonds Payable for the premium amount ($64,500), and credit Bonds Payable for the par - value ($2,150,000).

Journal entry for bonds issued at 97:

Date General Journal Debit Credit
January 01 Cash $2,085,500
Discount on Bonds Payable $64,500
Bonds Payable $2,150,000

Journal entry for bonds issued at 103:

Date General Journal Debit Credit
January 01 Cash $2,214,500
Premium on Bonds Payable $64,500
Bonds Payable $2,150,000

Answer:

Journal entry for bonds issued at 97: Date: January 01, Debit: Cash $2,085,500, Discount on Bonds Payable $64,500; Credit: Bonds Payable $2,150,000 Journal entry for bonds issued at 103: Date: January 01, Debit: Cash $2,214,500; Credit: Premium on Bonds Payable $64,500, Bonds Payable $2,150,000