Question

January 1, 2014, issued $400,000 of 7.5%, 10-year bonds were issued at 97. - Issuance of...

January 1, 2014, issued $400,000 of 7.5%, 10-year bonds were issued at 97.

- Issuance of 7.5% bonds on Jan 1 2014

- Accrual of bond interest and recognition of amortization on December 31 2014.

Instructions: Prepare journal entries for above and entries to show the early retirement on January 1, 2016 at 102. Bond discount had a $9,600 balance on January 1, 2016.

Homework Answers

Answer #1
Date Account titles & Explanations Debit Credit
1/1/2014 Cash (400,000*.97) 388000
discount on bonds 12000
Bonds paybale 400,000
12/31/2014 interest expense 31200
discount on bonds (12000/10) 1200
cash (400,000*7.5%) 30000
1/1/2016 bonds payable 400,000
loss on redemption 17,600
discount on bonds 9,600
Cash (400,000*1.02) 408000
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