Question

Celine Dion Company issued $600,000 of 10%, 20-year bonds on January 1, 2020, at 102. Interest is payable semiannually on July 1 and January 1. Dion Company uses the straight-line method of amortization for bond premium or discount. Instructions Prepare the journal entries to record the following.

a.The issuance of the bonds.
b.The payment of interest and the related amortization on July 1, 2020.
c.The accrual of interest and the related amortization on December 31, 2020.

Answer 1

Answer:

(a) Jan 1 2020

Dr Cash $612,000

Cr Premium on bond payable $12,000

Cr Bond payable $600,000

(b) July 1 2020

Dr Bond interest expense $29,700

Dr Premium on bond payable $300

Cr Cash $30,000

(c) Dec 31 2020

Dr Bond interest expense $29,700

Dr Premium on bond payable $300

Cr Bond interest payable $30,000

Explanation:

Celine Dion Company Journal entries

(a) Jan 1 2020

Dr Cash $612,000

( 600,000/100*102)

(The Face value of bond was actually $100 but was been issued at $102)

Cr Premium on bond payable $12,000

Cr Bond payable $600,000

(Bond issued at premium)

(b) July 1 2020

Dr Bond interest expense $29,700 (Interest 30,000- 300 amortization)

Dr Premium on bond payable $300 (12,000/40), 20 years = 40 half years

Cr Cash $30,000

(600000*10%*6/12)

( To record period interest payment and premium amortization.)

(c) Dec 31 2020

Dr Bond interest expense $29,700 (Interest 30,000- 300 amortization)

Dr Premium on bond payable $300 (12,000/40), 20 years = 40 half years

Cr Bond interest payable $30,000 (600000*10%*6/12)

( To record period interest accrual and premium amortization.)

Answer 2

Answer:

Explanation:

(a)1/1/2014...........................................Cash612,000Bonds Payable..............................................600,000Premium on Bonds Payable...........................12,000(600,000 x 102% = 612,000)

(b)7/1/2014........................Interest Expense29,700

Premium on Bonds Payable..............300

Cash................................................................30,000

(12,000 / 40 = 300)(600,000 x 10% x 6/12 = 30,000)