Question

On January 1, 2017, Bev-Evans Company issued 10.5%, 15-year bonds with a face value of $1,400,000. The bonds pay interest semi-annually on July 1 and January 1. Fiscal year end is December 31.

Assuming the bonds are issued at 105, [1] prepare journal entries to record the (a) issuance of the bonds, (b) accrual of interest and amortization on July 1 and December 31, 2017 and 2018, and (c) payment of interest on January 1, 2018 and on January 1, 2019. [2] Illustrate how the bonds and related accounts would be reported on the December 31 balance sheet for 2017 and 2018.