Journal Entries Related to Long Term Bonds
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Prepare journal entries to record the following transactions related to long-term bonds of XYZ Co.
(a) On April 1, 2006, XYZ issued $500,000, 9% bonds for $537,868 including accrued interest. Interest is payable annually on January 1, and the bonds mature on January 1, 2016.
(b) On July 1, 2008 XYZ retired $150,000 of the bonds at 102 plus accrued interest. XYZ uses straight-line amortization.
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The solution explains the journal entries related to long term bonds. It is provided in an Excel file attached.
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(a) On April 1, 2006, XYZ issued $500,000, 9% bonds for $537,868 including accrued interest. Interest is payable annually on January 1, and the bonds mature on January 1, 2016.
The face value of the bonds is $500,000 and the cash received is $537,868. The bonds are dated Jan 1 and issued on April 1, so there is accrued interest for 3 months. The interest amount is 500,000X9%X3/12 = 11,250. The premium on bonds is 37,868-11,250 = $26,618. The entry for issue of ...
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