Question

5) Larsen Corporation issued a $ 400,000, 5.5%, 10-year bonds payable at 101 on January 1, 2007. The bonds are retired on 1/1/2017. Prepare the journal entries on the date issuance and at the date of retirement.

Answer 1

(a)-The journal entry to record the issuance of bond on 01/01/2007

Date	Accounts Tittles and explanations	Debit ($)	Credit ($)
01/01/2007	Cash A/c [$400,000 x 101%]	404,000
	To Premium on Bond Payable A/c [$404,000 - $400,000]		4,000
	To Bond Payable A/c		400,000
	[Journal entry to record the issuance of Bond]

(b)-The journal entry to record the retirement of bond on 01/01/2017

Date	Accounts Tittles and explanations	Debit ($)	Credit ($)
01/01/2017	Bond Payable A/c	400,000
	To Cash A/c		400,000
	[Journal entry to record the retirement of Bond]