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-   -   Accounting - Bonds (https://www.askmehelpdesk.com/showthread.php?t=266072)

  • Oct 3, 2008, 03:36 PM
    droy1403
    Accounting - Bonds
    Hello. I've been trying to figure this question out all day, but I can't make sense of the first couple journal entries. The question states:

    On April 1, 2008, Company issued $600,000, 9% bonds for $645, 442 including accrued interest. Interest is payable annually on January 1, and the bonds mature on January 1, 2018. So the way I started the entry was:

    April 1, 2008
    DR Cash 645,442
    CR Interest Payable (600,000 *.09*3/12)
    CR Bonds Payable 631,942 (to balance)

    Is this right?

    Then on December 31, 2008 I would need to accrue interest expense, but I don't understand it. The way I calculated it ended up CR Bonds Payable, but shouldn't it be a DR because the bond was sold at a premium? Any help would be really appreciated!
  • Jan 28, 2009, 12:25 AM
    acctgwizard

    Credit bonds payable 600,000.
    Credit premium on Bonds Payable 31,942.
    Credit interest payable 13,500.

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