Question

Cupola Fan Corporation issued 8%, $560,000, 10-year bonds for $534,000 on June 30, 2018. Debt issue costs were $3,100. Interest is paid semiannually on December 31 and June 30. One year from the issue date (July 1, 2019), the corporation exercised its call privilege and retired the bonds for $540,000. The corporation uses the straight-line method both to determine interest expense and to amortize debt issue costs.

Required:
Prepare the journal entry to record the issuance of the bonds, the payment of interest and amortization of debt issue costs on December 31, 2018 & 2019, and the call of the bonds.

Record the issuance of the bonds

Dec. 31 2018 Record the payment interest

June 30 2019 Record the payment interest

July 1 2019 Record the call of the bonds

Answer 1

date	explanation	debit	credit
june 30 2018	cash	530900
	debt issue cost	3100
	discount on bonds payable	26000
	bonds payable		560000
dec 31 2018	interest expense	23700
	discount on bonds payable		1300
	cash		22400
dec 31 2018	debt issue expense	155
	debt issue cost		155
june 30 2019	interest expense	23700
	discount on bonds payable		1300
	cash		22400
june 30 2018	debt issue expense	155
	debt issue cost		155
1-Jun	bonds payable	560000
	loss on disposal of bonds	6190
	discount on bonds payable		23400
	debt issue cost		2790
	cash		540000