Horton Micro Chip Company issued $100,000 of face amount of 6-year bonds on January 1, 20X1. The bonds were issed at 103, and bear interest at a stated rate of 8% per annum, payable semiannually. The premium is amortized by the straight-line method.
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(a)
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Prepare the journal entry to record the initial issue on January, 20X1.
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(b)
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Prepare the journal entry that Horton would record on each interest date.
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(c)
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Prepare the journal entry that Horton would record at maturity of the bonds.
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(d)
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How much cash flowed “in” and “out” on this bond issue, and how does the difference compare to total interest expense that was recognized?
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a)(b)(c)
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GENERAL JOURNAL
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Date
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Accounts
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Debit
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Credit
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Issue
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