Reporting Financial Statement Effects of Bond
Transactions
Lundholm, Inc., which reports financial statements each December
31, is authorized to issue $250,000 of 7%, 15 -year bonds dated May
1, 2015, with interest payments on October 31 and April 30. Assume
the bonds are issued at par on May 1, 2015.
a. Prepare journal entries to record the bond issuance, payment
of the first semiannual period's interest, and retirement of
$150,000 of the bonds at 103 on November 1, 2016.
| General Journal |
| Date |
Description |
Debit |
Credit |
| 5/1/15 |
Answer |
| Answer |
Answer |
| 10/31/15 |
Answer |
| Answer |
Answer |
| 11/1/16 |
Bonds payable |
Answer |
Answer |
|
Answer |
b. Post the journal entries from part a to their respective
T-accounts.
| Cash |
|
Answer |
Answer |
|
|
Answer |
Answer |
|
| Loss on Bonds |
|
Answer |
Answer |
|
| Bonds Payable |
|
Answer |
Answer |
|
| Gain on Bonds |
|
Answer |
Answer |
|
| Interest Expense |
|
Answer |
Answer |
|
c. Record each of the transactions from part a in the financial
statement effects template.
Use negative signs with answers, when appropriate.
| Transaction |
|
|
|
Cash Asset |
+ |
Noncash Assets |
= |
Liabilities |
+ |
Contr. Capital |
+ |
Earned Capital |
|
Revenue |
- |
Expenses |
= |
Net income |
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| 5/1/15 Issue bonds |
|
|
$Answer |
|
$Answer |
|
$Answer |
|
$Answer |
|
$Answer |
|
$Answer |
|
$Answer |
|
$Answer |
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| 10/31/15 Interest payment on bonds |
|
Answer |
|
Answer |
|
Answer |
|
Answer |
|
Answer |
|
Answer |
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Answer |
|
Answer |
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| 11/1/16 Early retirement of bonds. |
Answer |
|
Answer |
|
Answer |
|
Answer |
|
Answer |
|
Answer |
|
Answer |
|
Answer |