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Bonds Payable

23. Entries for bonds payable. (20 points)
Prepare the necessary journal entries to record the following transactions relating to the long-term issuance of bonds of Titus Co.:

March 1
Issued $800,000 face value Titus Co. second mortgage, 8% bonds for $872,160, including accrued interest. Interest is payable semiannually on December 1 and June 1 with the bonds maturing 10 years from this past December 1. The bonds are callable at 102.

June 1
Paid semiannual interest on Titus Co. bonds. (Use straight-line amortization of any premium or discount.)

December 1
Paid semiannual interest on Titus Co. bonds and purchased $400,000 face value bonds at the call price in accordance with the provisions of the bond indenture.

Solution Preview

March 1: Cash Dr................................ 888,160
Bonds Payable Cr.................... 800,000
Premium on Bonds Payable Cr ......... 72,160
Interest Expense Cr
($800,000 x 8% x 3/12) ......... 16,000

The bonds are dated December 1 and issued on March 1, so three months interest is accrued.

June 1: Interest Expense Dr .................... 30,150
Premium on ...

Solution Summary

The solution exlains various entries relating to bonds payable

$2.19