Ask Experts Questions for FREE Help !
Ask
    droy1403's Avatar
    droy1403 Posts: 2, Reputation: 1
    New Member
     
    #1

    Oct 3, 2008, 03:36 PM
    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!
    acctgwizard's Avatar
    acctgwizard Posts: 3, Reputation: 1
    New Member
     
    #2

    Jan 28, 2009, 12:25 AM

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

Not your question? Ask your question View similar questions

 

Question Tools Search this Question
Search this Question:

Advanced Search

Add your answer here.


Check out some similar questions!

Accounting for bonds [ 2 Answers ]

When bonds are sold at a premium and the effective interest method is used for amortization, at each subsequent interest payment date, the cash paid is


View more questions Search