Lundholm, Inc., which reports financial statements each December 31, is authoriz
ID: 2342162 • Letter: L
Question
Lundholm, Inc., which reports financial statements each December 31, is authorized to issue $500,000 of 9%, 15-year bonds dated May 1, 2015, with interest payments on october 31 and April 30. Assume the bonds are issued at par on May 1, 2015.
a) Prepare Journal entries to record the bond issuance, payment of the first semiannual period's interest, and retirement of $300,000 of the bonds at 101 on November 1, 2016.
b) Post the Journal entries from part a) to their respective T-Accounts
c) Record each of the transactions from part a in the financial statement effects template
Explanation / Answer
a) 1 May 2015 Cash a/c Dr. 500000
To Bonds payable 500000
( Bonds issued at par )
31st oct 2015 Bond Interest expense a/c Dr. 22500
To Cash a/c 22500
(Interest payable semi annually = 500000*9%*6/12)
31st Dec 2015 Bond Interest Expense a/c Dr. 7500
To Interest Payable a/c 7500
(To record accrued interest for november & december payable in april.=500000*9%*2/12)
30 April 2016 Bond Interest expense a/c Dr. 15000
Interest payable a/c Dr. 7500
To Cash a/c 22500
(Interest payable semi annually = 500000*9%*6/12)
31st oct 2016 Bond Interest expense a/c Dr. 22500
To Cash a/c 22500
(Interest payable semi annually = 500000*9%*6/12)
1st Nov 2016 Bonds a/c Dr. 300000
Premium Dr. 3000
To Cash 303000
( Bonds matured @101)
Cash A/c Date Particulars Amount (Dr.) Date Particulars Amount (Cr.) 1st May 2015 Bonds Payable 500000 31st Oct 2015 Interest Expense 22500 31/12/15 By Bal c/d 477500 500000 500000 1/1/2016 To Bal B/d 477500 30/4/2016 By Bonds Interest expense 15000 31/10/16 By Bonds Interest expense 22500 1/11/2016 By Bonds payable a/c 300000 1/11/2016 By Premium A/c 3000 31/12/16 By Bal c/d 137000 477500 477500Related Questions
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