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Prepare the entries to record the interest payment

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Reference no: EM133066963

Problem - Assume that the following are independent situations recently reported in the Wall Street Journal.

1. General Electric (GE) 7% bonds (interest payable annually on January 1), maturing January 1, 2030, were issued at 112 on January 1, 2010.

2. Sears 7% bonds (interest payable annually on December 31), maturing January 1, 2028 were issued at 90 on January 1, 2018.

Required -

(a) Were GE and Sears bonds issued at a premium or a discount?

(b) Explain how bonds, both paying the same contractual interest rate, could be issued at different prices.

(c) Prepare the journal entry to record the issue of each of these two bonds, assuming each company issued $500,000 of bonds in total.

(d) Prepare the adjusting entries to record the accrued interest and the amortization of the premium on the bonds for GE, on December 31, 2010 using straight-line amortization.

(e) Prepare the entries to record the interest payment and the amortization of the discount on the bonds for Sears, on December 31, 2018 using straight-line amortization.

Reference no: EM133066963

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