Yumi asked in Business & FinanceInvesting · 7 years ago

Sanidas Company issued $500,000, 6%, 30-year bonds on January 1, 2012, at 103. Interest is payable annually on?

Sanidas Company issued $500,000, 6%, 30-year bonds on January 1, 2012, at 103. Interest is payable annually on January 1. Sanidas uses straight-line amortization for bond premium or discount.

Prepare the journal entries to record the following events

(a) The issuance of the bonds.

(b) The accrual of interest and the premium amortization on December 31, 2012.

(c) The payment of interest on January 1, 2013.

(d) The redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded.

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  • 7 years ago
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    2012

    Jan 1

    Debit Cash 515,000 [500,000 x 103%]

    Credit Premium on Bonds Payable 15,000

    Credit Bonds Payable 500,000

    Dec 31

    Debit Bond Interest Expense 30,500

    Debit Premium on Bonds Payable 500 [15,000 / 30 annual periods]

    Credit Interest Payable 30,000 [500,000 x 6% x 1 year]

    2013

    Jan 1

    Debit Interest Payable 30,000

    Credit Cash 30,000

    2042

    Jan 1

    Debit Bonds Payable 500,000

    Credit Cash 500,000

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