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Debt issue costs; issuance; expensing; early extinguishment; straight-line interest Cupola Fan Corporation issued 10%, $400,000, 10-year...


Debt issue costs; issuance; expensing; early extinguishment; straight-line interest

Cupola Fan Corporation issued 10%, $400,000, 10-year bonds for $385,000 on June 30, 2016. Debt issue costs were $1,500. Interest is paid semiannually on December 31 and June 30. One year from the issue date (July 1, 2017), the corporation exercised its call privilege and retired the bonds for $395,000. The corporation uses the straight-line method both to determine interest expense and to amortize debt issue costs.

Required:

1. Prepare the journal entry to record the issuance of the bonds.

2. Prepare the journal entries to record the payment of interest and amortization of debt issue costs on December 31, 2016.

3. Prepare the journal entries to record the payment of interest and amortization of debt issue costs on June 30, 2017.

4. Prepare the journal entry to record the call of the bonds.

Solutions

Expert Solution

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and format. For detailed answer refer to the supporting sheet.

ekkarill92 answered 2 years ago
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