Question

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.)

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