Question

Cupola Fan Corporation issued 12%, $580,000, 10-year bonds for $552,000 on June 30, 2021. Debt issue costs were $3,300. Interest is paid semiannually on December 31 and June 30. One year from the issue date (July 1, 2022), the corporation exercised its call privilege and retired the bonds for $560,000. 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, 2021 & June 30, 2022, 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.)

Answer 1

Date	General Journal	Debit	Credit
June 30, 2021	Cash	548,700
	Bonds Payable		548,700
Dec 31, 2021	Interest expense	36,365
	Bonds Payable		1,565	(580,000 - 548,700)/10 x 1/2
	Cash		34,800	(580,000 x 12% x 1/2)
June 30, 2022	Interest expense	36,365
	Bonds Payable		1,565	(580,000 - 548,700)/10 x 1/2
	Cash		34,800	(580,000 x 12% x 1/2)
July 1, 2022	Bonds Payable	551,830
	Loss on early extinguishment	8,170
	Cash		560,000