### Select your language

Suggested languages for you: Answers without the blur. Just sign up for free and you're in → Q6BE

Expert-verified Found in: Page 753 ### Intermediate Accounting (Kieso)

Book edition 16th
Author(s) Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
Pages 1552 pages
ISBN 9781118743201

# On January 1, 2017, JWS Corporation issued $600,000 of 7% bonds, due in 10 years. The bonds were issued for$559,224, and pay interest each July 1 and January 1. JWS uses the effective-interest method. Prepare the company’s journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry. Assume an effective-interest rate of 8%

The total for both the debit and credit sides is $644,792.68. See the step by step solution ### Step by Step Solution ## Meaning of Coupon Bond Bonds that pay periodic interest amount to the bondholder at equal frequency is coupon bond. Interest paid on bond at stated coupon rate. ## Journal Entries  Date Accounts and Explanation Debit Credit January 1, 2017 Cash$559,224 Discount on bonds payable $40,776 Bonds Payable$600,000 July 1, 2017 Interest expenses (559,224 x 8% x 1/2) $22,368.96 Cash$21,000.00 Discount on Bonds Payable $1,368.96 December 31, 2017 Interest expenses$22,423.72 Interest Payable $21,000 Discount on Bonds Payable$1,423.72

Working:

Discount on bonds payable on January 1= ($600,000-$559,224) = $40,776 Interest expenses on July 1 = ($559,224 x 8% x 1/12) = $22,368.96 Interest paid in cash paid on July 1= ($600,000 x 7% x 1/2) = $21,000. Interest expenses on December 31 = {(559,224 +$1,368.96) x 8% x 1/2} = $22,423.72 Interest payable on December 31, 2017 = ($600,000 x 7% x 1/2) = \$21,000 ### Want to see more solutions like these? 