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Accounting for Bonds Payable On January 1, 2015, Crabb & Co. issued 10-year bonds with a...

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Accounting

Accounting for Bonds Payable On January 1, 2015, Crabb & Co.issued 10-year bonds with a total face value of $500,000. The bondrequires annual interest payments on December 31 at a stated rateof 6%. Bonds with similar features are discounted in the market at8%

.1. DATE ACCOUNT NAME DEBIT CREDIT BALANCE SHEET INCOME STMT A =L + E R - E 01/01/15

DATE

ACCOUNT NAME

DEBIT

CREDIT

BALANCE SHEET

INCOME STMT

A

=

L

+

E

R

-

E

01/01/15

2.Prepare the entry at 12/31/15 to record interest expense, cashpaid, and discount amortization. DATE ACCOUNT NAME DEBIT CREDITBALANCE SHEET INCOME STMT A = L + E R - E 12/31/15

DATE

ACCOUNT NAME

DEBIT

CREDIT

BALANCE SHEET

INCOME STMT

A

=

L

+

E

R

-

E

12/31/15

Answer & Explanation Solved by verified expert
4.0 Ratings (565 Votes)

Table Value Based on
n= 10 Years
i= 8%
Cash Flow Amount Present Value
Interest - $500,000 X 6% 30,000 201,302
($30,000 X 6.71008)
Principal 500,000 231,595
($500,000 X 0.46319)
Price of Bonds 432,897
Discount on Bonds 67,103
DATE ACCOUNT NAME DEBIT CREDIT BALANCE SHEET INCOME STMT
A = L + E R - E
1/1/2015 Cash $ 432,897 $        432,897 = + -
Discount on Issue of Bond $   67,103 = + -
     Bonds Payable $     500,000 = $        432,897 + -
(Record the issue of Bonds at Discount) = + -
= + -
12/31/2015 Interest Expense (432897*8%) $   34,632 = + $ -34,632 - $ 34,632
     Discount on Issue of Bonds $   4,632 = $     4,632 + -
     Cash $ 30,000 $ -30,000 = + -
(Record the interest paid - I st Year) = + -
$ 402,897 = $ 437,529 + $ -34,632 $          -   - $ 34,632

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