Question

	There are three problems thisweek. Click the tabs at the bottom of the spreadsheet to accesseach one.
	On 1/1/2015, Snickers Company issued 10-year bondswith a face value of $700,000 at 101. The bonds carry a statedinterest rate of 8%, with
	interest payable semi-annually on January 1 andJuly 1. Snickers uses the straight-line method of amortizing bondpremium or discount.
	(a) Prepare the journal entry to record theissuance of the bonds.
	(b) Prepare the journal entry to record payment ofinterest on July 1, 2015.
	(c) Prepare the adjusting entry to record theaccrual of interest on December 31, 2015.
	(d) Prepare the balance sheet presentation for thebond on 12/31/2015.
	(e) Prepare the balance sheet presentation for thebond on 12/31/2016.
	Solutions:
	Date	Account	Debit	Credit
	1/1/2015	Cash	707,000
		Bonds Payable		700,000
		Premium on Bonds Payable		7,000
	7/1/2015	Interest Expense	28,000		Note that it would also be correct to combine thetwo entries into one.
		Cash		28,000
		Premium on Bonds Payable	350
		Interest Expense		350
	12/31/2015	Interest Expense	28,000		Note that it would also be correct to combine thetwo entries into one.
		Interest Payable		28,000
		Premium on Bonds Payable	350
		Interest Expense		350
	Snickers Corporation
	Balance Sheet (Partial)
	12/31/2015
	Long Term Liabilities
	Bonds Payable		700,000
	Add: Premium on Bonds Payable		6,300
				706,300
	Snickers Corporation
	Balance Sheet (Partial)
	12/31/2016
	Long Term Liabilities
	Bonds Payable		700,000
	Add: Premium on Bonds Payable		5,600
				705,600