Question

On January​ 1,

20172017​,

CameronCameron

Corporation issued

fivefive​-year,

88​%

bonds payable with a face value of

$ 2 comma 700 comma 000$2,700,000.

The bonds were issued at

9090

and pay interest on January 1 and July 1.

CameronCameron

amortizes bond discounts using the​ straight-line method. On December​ 31,

20192019​,

CameronCameron

retired the bonds early by purchasing them at a market price of

9292.

The​ company's fiscal year ends on December 31.Read the requirements

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.

Requirement 1. Journalize the issuance of the bonds on January​ 1,

20172017.

​(Record debits​ first, then credits. Exclude explanations from any journal​ entries.)

Journal Entry
Date		Accounts	Debit	Credit
2017
Jan 1

Requirement 2. Record the semiannual interest payment and amortization of bond discount on July​ 1,

20172017.

​(Record debits​ first, then credits. Exclude explanations from any journal​ entries.)

Journal Entry
Date		Accounts	Debit	Credit
2017
Jul 1

Requirement 3. Record the interest accrual and discount amortization on December​ 31,

20172017.

​(Record debits​ first, then credits. Exclude explanations from any journal​ entries.)

Journal Entry
Date		Accounts	Debit	Credit
2017
Dec 31

Requirement 4. Calculate the carrying value of the bonds payable on December​ 31,

20192019​,

prior to their retirement.

The carrying value of the bonds payable on December 31, 2019, prior to their retirement is $

.

Requirement 5. Calculate the gain or loss on the retirement of the bonds payable on December​ 31,

20192019.

Indicate where this gain or loss will appear in the financial statements.

Cameron Corporation will report a(n) $

as

on the

.

Journalize the issuance of the bonds on January​ 1, 20172017.
2.	Record the semiannual interest payment and amortization of bond discount on July​ 1, 20172017.
3.	Record the interest accrual and discount amortization on December​ 31, 20172017.
4.	Calculate the carrying value of the bonds payable on December​ 31, 20192019​, prior to their retirement.
5.	Calculate the gain or loss on the retirement of the bonds payable on December​ 31, 20192019. Indicate where this gain or loss will appear in the financial statements.

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Answer 1

Journal entries
S.no.	Accounts title and explanations		Debit $	Credit $
01.01.17	Cash account			2430000
	Discount on bonds payable		270000
	Bonds payable				27,00,000
	(for issuance of bonds)
01.07.17	Interest expense			135000
	Cash account (2700000*8%*6/12)		108000
	Discount on bonds payable (270000/10)		27000
	(for interest expense)
31.12.17	Interest expense			135000
	Interest payable (2700000*8%*6/12)		108000
	Discount on bonds payable (270000/10)		27000
	(for interest expense)
Carrying value of Bonds:
Bonds payable			27,00,000
Less: Unaortized discount on bonds payable	162000
	(270000-27000*4)
Caarrying value of bonds on 31.12.19	25,38,000
Carrying value of bonds on 31.12.19	25,38,000
Redemption price (2700,000*92%)	2484000
Gain on rdemption			54,000