Question

# Cupola Fan Corporation issued 8%, \$590,000, 10-year bonds for \$561,000 on June 30, 2018. Debt issue...

Cupola Fan Corporation issued 8%, \$590,000, 10-year bonds for \$561,000 on June 30, 2018. Debt issue costs were \$3,400. 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 \$565,000. 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.)

 No Date General Journal Debit Credit 1 June 30, 2018 Cash 557,600 Discount & Debt issue costs 32,400 Bonds Payable 590,000 2 December 31, 2018 Interest Expense 25,220 Discount & Debt issue costs 1,620 Cash 23,600 3 June 30, 2019 Interest Expense 25,220 Discount & Debt issue costs 1,620 Cash 23,600 4 July 01, 2019 Bonds Payable 590,000 Loss on early extinguishment 4,160 Discount & Debt issue costs 29,160 Cash 565,000

Workings:

1. Issuance of bonds: Cash = \$561,000 - \$3,400 = \$557,600

Discount & Debt issues costs = \$590,000 - \$561,000 + \$3,400 = \$32,400

2 & 3. Interest expense = \$1,620 + \$23,600 = \$25,220

Discount & Debt issue costs = \$32,400 / 20 = \$1,620

Cash = 4% x \$590,000 = \$23,600

4.Discount & Debt issue costs = 9/10 x (\$590,000 - \$561,000 + \$3400) = \$29,160

#### Earn Coins

Coins can be redeemed for fabulous gifts.