Watson Corporation issued $500,000 of 8%, 10-year bonds on January 1, 2023, at face value. The bonds
Question:
Watson Corporation issued $500,000 of 8%, 10-year bonds on January 1, 2023, at face value. The bonds require annual interest payments each December 31. Costs associated with the bond issuance were $25,000. Watson follows ASPE and uses the straight-line method to amortize bond issue costs. Prepare the journal entry for
(a) The January 1, 2023 issuance and
(b) The December 31, 2023 interest payment and bond issuance cost amortization.
(c) What are the general principles surrounding accounting for transaction costs associated with the issue of notes or bonds?
(d) What are the implications if the bonds were trading on the market for more than their face value?
Step by Step Answer:
Intermediate Accounting Volume 2
ISBN: 9781119740445
13th Canadian Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Irene M. Wiecek, Bruce J. McConomy