Watson Corporation issued $500,000 of 8%, 10-year bonds on January 1, 2020, at face value. The bonds
Question:
Watson Corporation issued $500,000 of 8%, 10-year bonds on January 1, 2020, at face value. The bonds require annual interest payments each December 31. Costs associated with the bond issuance were $25,000. Watson follows ASPE and uses the straight-line method to amortize bond issue costs. Prepare the journal entry for
(a) The January 1, 2020 issuance
(b) The December 31, 2020 interest payment and bond issuance cost amortization.
(c) What are the general principles surrounding accounting for transaction costs associated with the issue of notes or bonds?
(d) What are the implications if the bonds were trading on the market for more than their face value?
Step by Step Answer:
a Cash 500000 25000 475000 Bonds Payable 475000 b Interest Expense 40000 1 2500 2 42500 Bonds Payabl...View the full answer
Intermediate Accounting Volume 2
ISBN: 9781119497042
12th Canadian Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Irene M. Wiecek, Bruce J. McConomy
