Chapter 5 Journal Entries

Question 1

Lessee Rent Expense in Operating Lease

Answer 1

DR: Rent Expense
CR: Cash/Rent Payable

Question 2

Lessor Rental Income From Operating Lease

Answer 2

DR: Cash/Rent Receivable
CR: Rental Income

Question 3

Lessor Refundable Deposit

Answer 3

DR: Cash
CR: Refundable Deposit

Question 4

Lessee Capital Lease

Answer 4

DR: Fixed Asset - Leased Property
CR: Liability - Obligation Under Capital Lease

Question 5

Lessee: IFRS Capital Lease with Direct Costs

Answer 5

DR: Leased Equipment Under Capital Lease
CR: Obligation Under Capital Lease
CR: Cash [direct cost]

Question 6

Lessee Payment on Capital Lease

Answer 6

DR: Obligation Under Capital Lease
DR: Interest Payable
CR: Cash

Question 7

Lessee Year End Accrual of Interest and Record Depreciation

Answer 7

DR: Interest Expense
CR: Interest Payable
DR: Depreciation Expense
CR: Accumulated Depreciation - Leased Asset

Question 8

Lessor Record Sales-Type Lease

Answer 8

DR: Lease Payments Receivable
CR:          Unearned Interest Income 
CR:          Sales Revenue
DR: COGS
CR:          Inventory

Question 9

Lessor Record Direct Financing Lease

Answer 9

DR: Lease Payments Receivable
CR: Unearned Interest
CR: Asset

Question 10

Borrower: Issuance of Bonds

Answer 10

DR: Cash
DR: Discount on Bond Payable (if any)
CR: Bond Payable
CR: Premium on Bond Payable (if any)

Question 11

Investor: Issuance of Bonds

Answer 11

DR: Investment in Bonds
CR: Cash
Never any discount or premium

Question 12

Borrower: Issuance of Bond with Bond Issue Cost

Answer 12

DR: Cash
DR: Discount
DR: Bond Issue Cost (asset)
CR: Bonds Payable

Question 13

Borrower: Bond Payment

Answer 13

DR: Bond Interest Expense
CR: Discount on Bond Payable
CR: Cash

Question 14

Investor: Receipt of Bond Payment

Answer 14

DR: Cash
DR: Investment in Bonds
CR: Bonds Interest Revenue

Question 15

Borrower: Issuance with Accrued Interest

Answer 15

DR: Cash
DR: Discount on Bonds Payable
CR: Bonds Payable
CR: Bond Interest Expense/Payable

Question 16

Borrower: Year End Bond Interest Accrual and Discount Amortization

Answer 16

DR: Interest Expense
CR: Interest Payable
DR: Interest Expense
CR: Discount on Bonds Payable

Question 17

Record Bond Sinking Fund

Answer 17

DR: Bond Sinking Fund (asset)
CR: Cash

Question 18

Record Interest Payment on Bond Sinking Fund

Answer 18

DR: Bond Sinking Fund
CR: Interest Revenue

Question 19

Borrower: Convert Convertible Bonds with Book Value Method

Answer 19

DR: Bond Payable [eliminate]
DR: Premium on Bond Payable [eliminate]
CR: Common Stock [par]
CR: APIC

Question 20

Borrower: Convert Convertible Bonds with Market Value Method

Answer 20

DR: Bond Payable [eliminate]
DR: Premium on Bond Payable [eliminate]
DR: Loss on Conversion [plug]
CR:          Common Stock [par}
CR:          APIC [FV-Par]

Question 21

Bonds Sold with Detachable Stock Purchase Warrants

Answer 21

DR: Cash
CR: Bonds Payable
CR: APIC - Warrants [FV]

Question 22

Exercise of Detachable Warrants

Answer 22

DR: Cash
DR: APIC - Warrants [reverse]
CR:          Common Stock [par]
CR:          APIC
**no bond impact**

Question 23

Expiration of Unexercised Detachable Warrants

Answer 23

DR: APIC - warrants
CR: APIC

Question 24

Bond Extinguishment at Maturity (Debtor Paid)

Answer 24

DR: Bonds Payable
CR: Cash

Question 25

Loss on Extinguishment of Bonds

Answer 25

DR: Bonds Payable
DR: Loss on Extinguishment of Bonds (extraordinary?)
CR: Discount on Bonds Payable
CR: Unamortized Bond Issue Costs
CR: Cash

Question 26

Gain on Extinguishment of Bonds

Answer 26

DR: Bonds Payable
DR: Premium on Bonds Payable
CR: Cash
CR: Unamortized Bond Issue Costs
CR: Gain on Exting. of Bonds (extraordinary?)