On January 2, 2016, Prebish Corporation issued $1,500,000 of 10% bonds to yield 11% due December 31, 2025. Interest on the bonds is payable annually, each December 31. The bonds are callable at 101 (i.e., at 101% of the face amount) and on January 2, 2019, Prebish called $1,500,000 face amount of the bonds and retired them. (100 POINTS)
Instructions
Date | Accounts Title | Debit | Credit |
1/1/16 | Cash | 1,411,655 | |
Bonds Payable | 1,411,655 | ||
12/31/16 | Interest Expense (1,411,655 x 11%) | 155,282 | |
Cash (1,500,000 x 10%) | 150,000 | ||
Bonds Payable | 5,282 | ||
1/2/19 | Bonds Payable | 1,429,308 | |
Loss | 85,692 | ||
Cash (1,500,000 x 1.01) | 1,515,000 | ||
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