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25 February, 13:30

The Colson Company issued $300,000 of 10% bonds on January 1, 2020. The bonds are due January 1, 2025, with interest payable each July 1 and January 1. The bonds are issued at face value. Prepare Colson's journal entries for (a) the January issuance, (b) the July 1 interest payment and (c) the December 31 adjusting entry. Question 2: Assume the bonds in question 1 were issued at 98. Prepare the journal entries for (a) January 1, (b) July 1, and (c) December 31. Assume The Colson Company records straight line amortization semiannually. Question 3 Assume the bonds in question 3 were issued at 103. Prepare the journal entries for (a) January 1, (b) July 1, and (c) December 31. Assume the Colson Company records straight line amortization semiannually.

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  1. 25 February, 15:18
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    1. The bonds are issued at face value:

    (a) Jan 1

    Dr Cash 300,000

    Cr Bond payable 300,000

    (to record cash receipt from bond issuance at par)

    (b) Jul 1

    Dr Interest expenses 15,000

    Cr Cash 15,000

    (to record payment of interest expenses calculated as 300,000 x 10% / 2)

    (c) Dec 31

    Dr Interest expenses 15,000

    Cr Interest payable 15,000

    (to record incurred of interest expenses calculated as 300,000 x 10% / 2)

    2. The bonds in question 1 were issued at 98.

    (a) Jan 1

    Dr Cash 294,000

    Dr Discount on Bond 6,000

    Cr Bond Payable 300,000

    (to record cash receipt from bond issuance in which Cash receipt = 300,000 * 98%; Bond Payable is recorded at par $300,000; The difference is recorded as Dr Discount on Bond $6,000)

    (b) Jul 1

    Dr Interest expenses 15,600

    Cr Discount on bond 6,00

    Cr Cash 15,000

    (to record interest expenses incurred which is consists of $15,000 cash payment and the amortization of Discount on bond account calculated as 6,000/10 interest payment period)

    (c) Dec 31

    Dr Interest expenses 15,600

    Cr Discount on bond 6,00

    Cr Interest Payable 15,000

    (to record interest expenses incurred which is consists of $15,000 interest payable plus the amortization of Discount on bond account calculated as 6,000/10 interest payment period).

    3. Assume the bonds in question 3 were issued at 103:

    (a) Jan 1

    Dr Cash 309,000

    Cr Premium on Bond 9,000

    Cr Bond payable 300,000

    (to record cash receipt from bond issuance in which Cash receipt = 300,000 * 103%; Bond Payable is recorded at par $300,000; The difference is recorded as Cr Premium on Bond $9,000)

    (b) Jul 1

    Dr Interest expenses 14,100

    Dr Premium on bond 900

    Cr Cash 15,000

    (to record interest expenses incurred which is consists of $15,000 cash payment minus the allocation of Premium on bond account calculated as 9,000/10 interest payment period)

    (c) Dec 31

    Dr Interest expenses 14,100

    Dr Premium on bond 900

    Cr Interest Payable 15,000

    (to record interest expenses incurred which is consists of $15,000 interest payable minus the allocation of Premium on bond account calculated as 9,000/10 interest payment period)
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