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PREPARING JOURNAL ENTRIES Legend Company uses the straight-line method for amortization of all bond premium & discounts....

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Accounting

PREPARING JOURNAL ENTRIES

Legend Company uses the straight-line method foramortization of all bond premium & discounts. During fiscalyear 2018 Legend had the following bond payabletransactions:

January 2, issued ten, $1,000 bonds at 101. These 5-yearbonds are dated January 1, 2017. The contract interest rate is6%.  Interest is payable semi-annual on January 1 andJuly 1.

July 1, Legend issued $400,000 of 10%, 10-yearbonds.  The bonds are dated January 1, 2017 were issuedat 90, and pay interest on July 1 and January 1.

October 1, Legend issued 10-year bonds $10,000 facevalue bonds for $10,860 cash. The bonds have a stated rate of 8%.Interest is payable on October 1 and April 1.

Use this information to prepare GeneralJournal entries for the three bonds issued and anyinterest accruals and payments for the fiscal year 2018. (Round allcalculations to nearest whole dollar.)

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3.9 Ratings (584 Votes)
TRANSACTION 1 DATE JOURNAL ENTRY DEBIT IN CREDIT IN JAN 2 2017 BANK AC DR 101000000 100010110 TO BONDS PAYABLE AC 100000000 TO PREMIUM ON BONDS PAYABLE AC 1000000 JULY 1 2018 INTEREST EXPENSE AC DR 2900000 300001000 WE HAVE SUBTRACTED THE PREMIUM AMOUNT FROM THE INTEREST EXPENSE    See Answer
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