Cupola Fan Corporation issued 10%, $480,000, 10-year bonds for $468,000 on June

Question

Cupola Fan Corporation issued 10%, $480,000, 10-year bonds for $468,000 on June 30, 2018. Debt issue costs were $2,300. Interest is paid semiannually on December 31 and June 30. One year from the issue date (July 1, 2019), the corporation exercised its call privilege and retired the bonds for $475,000. The corporation uses the straight-line method both to determine interest expense and to amortize debt issue costs.

Required:
1. to 4. Prepare the journal entry to record the issuance of the bonds, the payment of interest and amortization of debt issue costs on December 31, 2018 & 2019, and the call of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Explanation / Answer

Date Account Title Debit Credit June 30, 2018 Cash $465,700 Debt issue costs $2,300 Discount on Bonds $12,000 Bonds Payable $480,000 December 31, 2018 Interest Expense $24,715 To Cash ($480,000 x 10% x 6/12) $24,000 To Debt issue costs ($2,300 / 20) $115 To Discount on Bonds ($12,000 / 20) $600 June 30, 2019 Interest Expense $24,715 To Cash ($480,000 x 10% x 6/12) $24,000 To Debt issue costs ($2,300 / 20) $115   To Discount on Bonds ($12,000 / 20) $600 July 1, 2019 Bonds Payable $480,000 Loss on call of bonds $7,870 To Cash $475,000 To Discount on Bonds ($12,000 x 18/20) $10,800 To Debt issue costs ($2,300 x 18 / 20) $2,070

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