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Mystle company issued $500000 of 8% 10-year bonds on December 31, 2017 for 470,000. Interest is...

Mystle company issued $500000 of 8% 10-year bonds on December 31, 2017 for 470,000. Interest is payable annually on December 31. On January 1, 2009, Mystle called the bond at 100. Mystle used the straight line method of amortization and had a calendar year end.

Prepare the appropriate journal entries.

1) December 31, 2017 for the bond issue.

1) December 31, 2018, for the first payment

3) January 1, 2019 call

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Answer #1

Journal entry :

date account and explanation debit credit
Dec 31, 2017 Cash 470000
Discount on bonds payable 30000
Bonds payable 500000
(To record bond issue)
Dec 31,2018 Interest expense 43000
  Discount on bonds payable (30000/10) 3000
Cash (500000*8%) 40000
(To record interest paid)
Jan 1,2019 Bonds payable 500000
Loss on redemption on bonds payable 27000
  Discount on bonds payable (30000-3000) 27000
Cash 500000
(To record bond redemption)
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