Cupola Fan Corporation issued 10%, $540,000, 10-year bonds for $516,000 on June 30, 2018. Debt issue costs were $2,900. 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 $520,000. The corporation uses the straight-line method both to determine interest expense and to amortize debt issue costs. Required: 1. to 4. 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. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Date | General Journal | Debit | Credit |
Jun-30 | Cash | 513100 | |
Debt issue costs | 2900 | ||
Discount on bonds payable(540000-516000) | 24000 | ||
Bonds payable | 540000 | ||
Dec-31 | Interest expense | 28200 | |
Discount on bonds payable(24000/20) | 1200 | ||
Cash(540000*5%) | 27000 | ||
Dec-31 | Debt issue expense(2900/2) | 145 | |
Debt issue costs | 145 | ||
Jun-30 | Interest expense | 28200 | |
Discount on bonds payable(24000/20) | 1200 | ||
Cash(540000*5%) | 27000 | ||
Jun-30 | Debt issue expense | 145 | |
Debt issue costs | 145 | ||
Jul-01 | Bonds payable | 540000 | |
Loss on early extinguishment | 4210 | ||
Debt issue costs(2900*9/10) | 2610 | ||
Discount on bonds payable(24000*9/10) | 21600 | ||
Cash | 520000 |
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