Question

On January 1, a corporation issued $210,000 in bonds at face value. The bonds have a stated interest rate of 7 percent. The bonds mature in 10 years and pay interest once per year on December 31.

Required:

1. 1, 2 & 3. Prepare the required journal entries to record the bond issuance, interest payment on December 31, early retirement of the bonds. Assume the bonds were retired immediately after the first interest payment at a quoted price of 102. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

• 1.Record the issuance of bonds of $210,000 at face value.

• 2 Record the interest payment on December 31.

• 3 Record the retirement of the bonds at a quoted price of 102.

Answer 1

Answer : Preparation of journal entries :
Date	Acounts Titles and Explanation	Debit (in $)	Credit (in $)
Jan-01	Cash	$210,000
	Bonds payable		$210,000
	(To record issue of bonds)
Dec-31	Interest expenses ($210,000 x 7%)	$14,700
	Cash		$14,700
	(To record interest payment)
Dec-31	Bonds payable	$210,000
	Loss on retirement of bonds	$4,200
	Cash                 ($210,000 x 102/100)		$214,200
	(To record retirement of bonds)