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The company issued a 120,000 7% 10 year bond payable 88 on Jan 1. Interest is paid semiannually on Jan 1

Journalize the issuance of the bond payable on January​ 1, 2024

11 answers

To journalize the issuance of the bond payable on January 1, 2024, we need to consider the key elements of the bond. The bond has a face value of $120,000, a stated interest rate of 7%, and it was issued at a discount for $88,000.

The difference between the face value and the cash received indicates that the bonds were issued at a discount.

Here's how to journalize the issuance:

Date: January 1, 2024

Journal Entry:

| Account Title | Debit | Credit | |-----------------------------|---------------|----------------| | Cash | $88,000 | | | Discount on Bonds Payable | $32,000 | | | Bonds Payable | | $120,000 |

Explanation:

  • Cash is debited for the amount received, which is $88,000.
  • Discount on Bonds Payable is debited for the difference between the face value ($120,000) and the cash received ($88,000), which is $32,000.
  • Bonds Payable is credited for the face value of the bonds, which is $120,000.

This entry reflects the transaction of issuing bonds at a discount.

Incorrect.
Cash is 105,600
The discount is 14,400 and bonds payable is correct at 120,000

Thank you for the clarification! Let's correct the journal entry based on the information you provided.

Given that:

  • Cash received is $105,600
  • Discount on Bonds Payable is $14,400
  • Face value of Bonds Payable is $120,000

Journal Entry for Issuance of the Bond Payable on January 1, 2024:

Date: January 1, 2024

| Account Title | Debit | Credit | |-----------------------------|---------------|----------------| | Cash | $105,600 | | | Discount on Bonds Payable | $14,400 | | | Bonds Payable | | $120,000 |

Explanation:

  • Cash is debited for the amount received ($105,600).
  • Discount on Bonds Payable is debited for the discount on the bonds ($14,400). This offset indicates that the bonds were issued under their face value.
  • Bonds Payable is credited for the face value of the bonds ($120,000).

This entry accurately reflects the issuance of the bonds payable with the given amounts. Thank you for your patience!

Origin Company issued a $90,000, 11%, 10-year bond payable at 88 on Jan 1, 2024. Interest is paid semiannually on Jan 1 and July 1.
Journalize the issuance of the bond payable on January 1, 2024

To journalize the issuance of the bond payable for Origin Company on January 1, 2024, we need to consider the following details:

  • Face Value of the Bond: $90,000
  • Stated Interest Rate: 11%
  • Bond Issued at: 88 (which means it was issued at a discount)
  • Cash Received: 88% of $90,000
  • Discount on Bonds Payable: Face Value - Cash Received

Calculation:

  1. Cash received:
    \[ 90,000 \times 0.88 = 79,200 \]

  2. Discount on Bonds Payable:
    \[ 90,000 - 79,200 = 10,800 \]

Journal Entry for Issuance of the Bond Payable on January 1, 2024:

Date: January 1, 2024

| Account Title | Debit | Credit | |-----------------------------|---------------|----------------| | Cash | $79,200 | | | Discount on Bonds Payable | $10,800 | | | Bonds Payable | | $90,000 |

Explanation:

  • Cash is debited for the amount received ($79,200).
  • Discount on Bonds Payable is debited to reflect the discount on the borrowing ($10,800).
  • Bonds Payable is credited for the face value of the bond ($90,000).

This entry accurately reflects the issuance of the bonds payable at a discount.

Correct!
Now Journalize the payment of the semi annual interest and amortization of the bond discount.

To journalize the payment of semiannual interest and the amortization of the bond discount for the bond issued by Origin Company, we need to follow these steps:

Details:

  • Face Value of Bond: $90,000
  • Stated Interest Rate: 11%
  • Semiannual Interest Payment: \[ \text{Interest Payment} = \text{Face Value} \times \text{Interest Rate} \times \frac{1}{2} = 90,000 \times 11% \times \frac{1}{2} = 4,950 \]
  • Total Discount on Bonds Payable: $10,800 (from the previous calculation)
  • Number of Semiannual Periods: 10 years × 2 = 20 periods
  • Amortization of Bond Discount per Period: \[ \text{Amortization} = \frac{\text{Total Discount}}{\text{Number of Periods}} = \frac{10,800}{20} = 540 \]

Journal Entry for Payment of Interest and Amortization of Bond Discount on January 1 and July 1:

Date: January 1, 2024 (first payment), and again on July 1, 2024

January 1 and July 1 Journal Entry

| Account Title | Debit | Credit | |-----------------------------|---------------|----------------| | Interest Expense | $5,490 | | | Cash | | $4,950 | | Discount on Bonds Payable | | $540 |

Explanation:

  1. Interest Expense: This account records the total interest expense incurred, which includes both the cash interest and the amortization of the discount.

    • Total Interest Expense:
      \[ \text{Interest Payment} + \text{Amortization} = 4,950 + 540 = 5,490 \]

  2. Cash: This account records the actual cash paid out for the interest payment, which is $4,950.

  3. Discount on Bonds Payable: This account reflects the amortization of the bond discount during the period, which is $540.

This journal entry is recorded for both the semiannual interest payment and the amortization of the bond discount on January 1 and July 1 of each year until the bond matures.

Journalize $75,000, 4%, 10 year bond payable at 104

To journalize the issuance of a bond payable for a $75,000, 4%, 10-year bond that is issued at 104, we need to follow these steps:

Details:

  • Face Value of the Bond: $75,000
  • Stated Interest Rate: 4%
  • Bond Issued at: 104 (which means it was issued at a premium)
  • Cash Received: 104% of $75,000
  • Premium on Bonds Payable: Cash Received - Face Value

Calculation:

  1. Cash received:
    \[ 75,000 \times 1.04 = 78,000 \]

  2. Premium on Bonds Payable:
    \[ 78,000 - 75,000 = 3,000 \]

Journal Entry for Issuance of the Bond Payable:

Date: (Assuming the date of issuance is today)

| Account Title | Debit | Credit | |-----------------------------|---------------|----------------| | Cash | $78,000 | | | Premium on Bonds Payable | $3,000 | | | Bonds Payable | | $75,000 |

Explanation:

  • Cash is debited for the amount received ($78,000).
  • Premium on Bonds Payable is debited for the premium on the bonds ($3,000).
  • Bonds Payable is credited for the face value of the bonds ($75,000).

This entry reflects the issuance of the bonds payable at a premium. Let me know if you need further assistance!

Journalize the payment of semiannual interest and amortization of the bond discount or premium on July​ 1, 2024

To journalize the payment of semiannual interest and the amortization of the bond premium for the bond issued by Origin Company, we will first compute the semiannual interest payment and the amortization amount for the bond premium.

Bond Details:

  • Face Value of Bond: $75,000
  • Stated Interest Rate: 4%
  • Bond Issued at: 104 (issued at a premium)
  • Semiannual Interest Payment: \[ \text{Semiannual Interest Payment} = \text{Face Value} \times \text{Interest Rate} \times \frac{1}{2} \] \[ = 75,000 \times 4% \times \frac{1}{2} = 1,500 \]

Amortization of Premium

Since the bond was issued at a premium, we will need to amortize this premium over the life of the bond.

  1. Total Premium on Bonds Payable: $3,000 (as calculated previously)
  2. Number of Semiannual Periods: 10 years × 2 = 20 periods
  3. Amortization of Bond Premium per Period: \[ \text{Amortization} = \frac{\text{Total Premium}}{\text{Number of Periods}} = \frac{3,000}{20} = 150 \]

Journal Entry on July 1, 2024 (for semiannual interest payment and amortization of the premium):

Date: July 1, 2024

| Account Title | Debit | Credit | |-----------------------------|---------------|----------------| | Interest Expense | $1,350 | | | Premium on Bonds Payable | $150 | | | Cash | | $1,500 |

Explanation:

  1. Interest Expense: This account reflects the actual interest expense incurred after accounting for the premium amortization:

    • Calculated as: \[ \text{Semiannual Interest Payment} - \text{Amortization of Premium} = 1,500 - 150 = 1,350 \]

  2. Premium on Bonds Payable: This account is debited to reflect the amortization of the bond premium, which is $150.

  3. Cash: This account reflects the actual cash paid out to bondholders for the interest payment, which is $1,500.

This journal entry captures the semiannual interest payment and the associated amortization of the premium for the bond. Let me know if you need any further assistance!