Prepare the journal entry to record the issuance of the bond

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Reference no: EM13843219

Problem 1

On July 1, 2014, Flanagin Corporation issued $1,649,500, 10%, 10-year bonds at $1,873,678. This price resulted in an effective-interest rate of 8% on the bonds. Flanagin uses the effective-Interest method to amortize bond premium or discount. The bonds pay semiannual interest July 1 and January 1.

Date Account Titles and Explanation Debit Credit
July 1, 14








Prepare the journal entry to record the issuance of the bonds on July 1, 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)


FLANAGIN CORPORATION

Bond Premium Amortization

Effective-Interest Method-Semiannual Interest Payments

Semiannual Interest Periods Interest to be Paid Interest Expense Premium Amortization Unamortized Premium Bond Carrying Value
Issue Date




1




2




3




Prepare an amortization table through December 31, 2015 (3 Interest periods), for this bond Issue. (Round answers to 0 decimal places, e.g. 15,250.)

Date Account Titles and Explanation Debit Credit
Dec. 31, 2014








Prepare the journal entry to record the accrual of Interest and the amortization of the premium on December 31, 2014. (Round answers to 0 decimal places, a p. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date Account Titles and Explanation Debit Credit
July 1, 15








Prepare the journal entry to record the accrual of Interest and the amortization of the premium on December 31, 2015. (Round answers to 0 decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date Account Titles and Explanation Debit Credit
Dec. 31, 2015








Problem 2

On July 1, 2014, Kellerman Company issued $3,733,900, 8%, 10-year bonds at $3,268,575. This price resulted in an effective-Interest rate of 10% on the bonds. Kellerman uses the effective-Interest method to amortize bond premium or discount. The pones pay semiannual interest July 1 and January 1.

Your answer is partially correct. Try again.

Prepare the journal entries to record the following transactions. (Round answers to 0 decimal places, e.g. 15,250. Credit account titles are automatically indented when amount is entered, Do not indent manually.)

(1) The Issuance of the bonds on July 1, 2014.

(2) The accrual of Interest and the amortization of the discount on December 31, 2014.

(3) The payment of Interest and the amortization of the discount on July 1, 2015, assuming no accrual of Interest on June 30.

(4) The accrual of Interest and the amortization of the discount on December 31, 2015.

No. Date Account Titles and Explanation Debit Credit
1 July 1, 14








2 Dec. 31, 2014








3 July 1, 15








4 Dec. 31, 2015








Show the proper balance sheet presentation for the liability for bonds payable on the December 31, 2015, balance sheet. (For Bonds Payable, Notes Payable and Mortgage payable enter the account name only and do not provide any additional descriptive information e.g. due 2024.)


Kellerman Company

Balance Sheet

31-Dec-15









Reference no: EM13843219

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