On June 1, 2017, W Corp. issued $3,000,000, 9%, 5-year bonds at face value. They
ID: 2524547 • Letter: O
Question
On June 1, 2017, W Corp. issued $3,000,000, 9%, 5-year bonds at face value. They were dated June 1, 2017, and pay interest annually on June 1. Financial statements are prepared annually on December 31.
(a) Prepare the journal entry to record the issuance of the bonds on June 01, 2017.
(b) Prepare the adjusting entry to record the accrual of interest on December 31, 2017.
(d) Prepare the journal entry to record payment of (J,F,M,A,M) interest on June 1, 2018.
(e) Prepare the adjusting entry to record the accrual of (J,J,A,S,O,N,D) interest on
December 31, 2018.
(f) Assume that on JAN 1, 2019, W Corp pays the accrued interest and calls the bonds at
102 (102% of the face value of the bonds). Record the payment of interest and redemption
of the bonds.
(a) June 01
Cash
3000000
2017
Bonds Payable
3000000
(b) Dec 31
Interest Expense
2017
Interest Payable
(d) June 01
Interest Payable
2018
Interest Expense
Cash
(e) Dec 31
Interest Expense
2018
Interest Payable
(f) Jan 01
Interest Payable
2019
Cash
Pay Interest
Bonds Payable
& Redem
Loss on Bond redemption
Cash
(a) June 01
Cash
3000000
2017
Bonds Payable
3000000
(b) Dec 31
Interest Expense
2017
Interest Payable
(d) June 01
Interest Payable
2018
Interest Expense
Cash
(e) Dec 31
Interest Expense
2018
Interest Payable
(f) Jan 01
Interest Payable
2019
Cash
Pay Interest
Bonds Payable
& Redem
Loss on Bond redemption
Cash
Explanation / Answer
Date
General Journal
Debit
Credit
a) June 01
Cash
$3,000,000
2017
Bonds Payable
$3,000,000
(b) Dec 31
Interest Expense (3,000,000*coupon rate 9%*7 months / 12)
$157,500
2017
Interest Payable
$157,500
(d) June 01
Interest Payable
$157,500
2018
Interest Expense (3,000,000*coupon rate 9%*5 months / 12)
$112,500
Cash
$270,000
(e) Dec 31
Interest Expense (3,000,000*coupon rate 9%*7 months / 12)
$157,500
2018
Interest Payable
$157,500
(f) Jan 01
Interest Payable
$157,500
2019
Cash
$157,500
Pay Interest
Bonds Payable
$3,000,000
& Redem
Loss on Bond redemption (bal fig)
$60,000
Cash (Face value 3,000,000 x 102%)
$3,060,000
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Date
General Journal
Debit
Credit
a) June 01
Cash
$3,000,000
2017
Bonds Payable
$3,000,000
(b) Dec 31
Interest Expense (3,000,000*coupon rate 9%*7 months / 12)
$157,500
2017
Interest Payable
$157,500
(d) June 01
Interest Payable
$157,500
2018
Interest Expense (3,000,000*coupon rate 9%*5 months / 12)
$112,500
Cash
$270,000
(e) Dec 31
Interest Expense (3,000,000*coupon rate 9%*7 months / 12)
$157,500
2018
Interest Payable
$157,500
(f) Jan 01
Interest Payable
$157,500
2019
Cash
$157,500
Pay Interest
Bonds Payable
$3,000,000
& Redem
Loss on Bond redemption (bal fig)
$60,000
Cash (Face value 3,000,000 x 102%)
$3,060,000
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