On January 1, 2017, Witherspoon Satellites issued 4,500,000, 9%, 10-year bonds at 4,219,600. This price resulted in
Question:
On January 1, 2017, Witherspoon Satellites issued £4,500,000, 9%, 10-year bonds at £4,219,600. This price resulted in an effective-interest rate of 10% on the bonds. Witherspoon uses the effective-interest method to amortize bond premium or discount. The bonds pay annual interest January 1.
Instructions
(Round all computations to the nearest pound.)
(a) Prepare the journal entry to record the issuance of the bonds on January 1, 2017.
(b) Prepare an amortization table through December 31, 2018 (2 interest periods) for this bond issue.
(c) Prepare the journal entry to record the accrual of interest and the amortization of the discount on December 31, 2017.
(d) Prepare the journal entry to record the payment of interest on January 1, 2018.
(e) Prepare the journal entry to record the accrual of interest and the amortization of the discount on December 31, 2018.
Step by Step Answer:
Financial Accounting
ISBN: 978-1118978085
IFRS 3rd edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso