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11 December, 08:39

Celine Dion Company issued $600,000 of 10%, 20-year bonds on January 1, 2020, at 102. Interest is payable semiannually on July 1 and January 1. Dion Company uses the straight-line method of amortization for bond premium or discount. Prepare the journal entries to record the following. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) (a) The issuance of the bonds. (b) The payment of interest and the related amortization on July 1, 2020. (c) The accrual of interest and the related amortization on December 31, 2020.

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  1. 11 December, 12:28
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    The Journal entries are as follows:

    (a) On January 1, 2020

    Cash A/c (6,000 bonds * $102) Dr. $612,000

    To Bonds payable $600,000

    To premium on bonds payable $12,000

    (To record the issuance of the bonds)

    Workings:

    premium on bonds payable = $612,000 - $600,000

    = $12,000

    (b) On July 1, 2020

    Interest expense A/c Dr. $29,700

    Premium on bonds payable A/c Dr. $300

    To cash A/c $30,000

    (To record the interest expense)

    Workings:

    Cash = $600,000 * (6/12) * 10%

    = $30,000

    Premium on bonds payable = $12,000 : 40 periods

    = $300

    (c) On December 31, 2020

    Interest expense A/c Dr. $29,700

    Premium on bonds payable A/c Dr. $300

    To Interest payable A/c $30,000

    (To record the accrual of interest expense)
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