Question

Prepare journal entries to record the following transactions related to long-term bonds of Whispering Co.

On April 1, 2019, Whispering issued $1,960,000, 9% bonds for $2,108,439 including accrued interest. Interest is payable annually on January 1, and the bonds mature on January 1, 2029. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

On July 1, 2021 Whispering retired $588,000 of the bonds at 102 plus accrued interest. Whispering uses straight-line amortization. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)

Account Titles and Explanation	Debit	Credit
(To record interest and premium on bonds)
(To record entry for retirement of bonds)

Answer 1

Date	Account Titles and Explanation	Debit (in $)	Credit (in $)
Apr-01	Cash	$ 2,108,439
	Bonds Payable		$ 1,960,000
	Premium on Bonds Payable   - Bal. Fig.		$ 104,339
	Interest Expense             ($1,960,000 x 9% x 3/12)		$ 44,100
	(To record the issue of Bonds)
Date	Account Titles and Explanation	Debit (in $)	Credit (in $)
Jul-01	Interest Expense - Bal. Fig.	$ 24,855
	Premium on Bonds Payable ($ 104,339 x 30% x 6/117)	$ 1,605
	Cash           ($ 588,000 x 9% x 6/12)		$ 26,460
	(To record interest and premium on bonds)
	Workings:          January 2021 to July 2021   = 6 months April 1, 2019 to January 1,2029 = 117 months    July 1, 2021 to January 1,2029 = 90 months Percentage of Premium = $ 588,000 / $ 1,960,000 = 30%
Jul-01	Bonds Payable	$ 588,000
	Premium on Bonds Payable	$ 24,078
(104,339 x 30% x 90/117)
	Cash           ( $ 588,000 x 102%)		$ 599,760
	Gain on Redemption of Bonds		$ 12,318
	To record entry for retirement of bonds)