On January 1, 2009, General Bell Corp. issued at 97, 8% bonds with a par value o
ID: 2523992 • Letter: O
Question
On January 1, 2009, General Bell Corp. issued at 97, 8% bonds with a par value of $800,000, due in 10 years. Interest is payable semiannually on June 30 and December 31 of each year. In addition General Bell incurred bond issue costs totalling $16,000. 3 years after the issue date, on January 1, 2012, General Bell calls the entire issue at 101 and cancels it. General Bell amortizes discounts/premiums, using the straight-line method.
Required:
1) Record the necessary journal entries on:
a. January 1, 2009
b. June 30 and December 31, 2009
c. January 1, 2012
2) Assume that the bond was sold on March 1, 2009 for the same price as above plus accrued interest and record the necessary journal entries on:
a. March 1, 2009
b. June 30 and December 31, 2009
c. January 1, 2012
Explanation / Answer
Date Accounts Title Dr Cr Jan 1 2009 Cash (bal fig) $760,000 a Discount On Bonds Payable (800000/100*3) 24000 Bond Issuance Cost $16,000 Bonds Payable $800,000 (to record bond issued) b 30-Jun-09 Interest expenses (bal fig) 30000 Discount On Bonds Payable 24000/20 period 1200 Bond Issuance Cost (16000/20) 800 Cash (800000*4%) 32000 (being interest paid recorded) De 31 2009 Interest expenses (bal fig) 30000 Discount On Bonds Payable 24000/20 period 1200 Bond Issuance Cost (16000/20) 800 Cash (800000*4%) 32000 (being interest paid recorded) c Jan 1 2012 Bonds payable $800,000 Loss on Redemption (bal fig) $36,000 Discount On Bonds Payable 24000-(24000/20*6) 16800 Bond Issuance Cost 16000-(16000/20*6) 11200 Cash (800000*101%) 808000 ans 2 1-Mar Cash (bal fig) $760,000 Discount On Bonds Payable (800000/100*3) 24000 Bond Issuance Cost $16,000 Interest expenses (800000*8%*2/12) $10,667 Bonds Payable $800,000 Interest payable $10,667 (to record bond issued) b 30-Jun-09 Interest expenses (bal fig) 19333 Interest payable (800000*8%*2/12) 10667 Discount On Bonds Payable 24000/20 period 1200 Bond Issuance Cost (16000/20) 800 Cash (800000*4%) 32000 (being interest paid recorded) De 31 2009 Interest expenses (bal fig) 30000 Discount On Bonds Payable 24000/20 period 1200 Bond Issuance Cost (16000/20) 800 Cash (800000*4%) 32000 (being interest paid recorded) c Jan 1 2012 Bonds payable $800,000 Loss on Redemption (bal fig) $36,000 Discount On Bonds Payable 24000-(24000/20*6) 16800 Bond Issuance Cost 16000-(16000/20*6) 11200 Cash (800000*101%) 808000
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