Question

Cupola Fan Corporation issued 10%, $540,000, 10-year bonds for $516,000 on June 30, 2018. Debt issue...

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.)

Homework Answers

Answer #1
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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