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Jack's Electric sold $4,495,000, 13%, 10-year bonds on January 1, 2020. The bonds were dated January...

Jack's Electric sold $4,495,000, 13%, 10-year bonds on January 1, 2020. The bonds were dated January 1, 2020, and paid interest on January 1. The bonds were sold at 98.

Prepare the journal entry to record the issuance of the bonds on January 1, 2020.

At December 31, 2020, $7,500 of the Discount on Bonds Payable account has been amortized. Show the balance sheet presentation of the long-term liability at December 31, 2020.

On January 1, 2022, when the carrying value of the bonds was $4,420,100, the company redeemed the bonds at 102. Record the redemption of the bonds assuming that interest for the period has already been paid.

Solutions

Expert Solution

Answer a.

Face Value of Bonds = $4,495,000

Issue Value of Bonds = 98% * Face Value of Bonds
Issue Value of Bonds = 98% * $4,495,000
Issue Value of Bonds = $4,405,100

Discount on Bonds Payable = Face Value of Bonds - Issue Value of Bonds
Discount on Bonds Payable = $4,495,000 - $4,405,100
Discount on Bonds Payable = $89,900

Answer b.

Unamortized Discount = Discount on Bonds Payable - Discount Amortized
Unamortized Discount = $89,900 - $7,500
Unamortized Discount = $82,400

Answer c.

Amount Paid at Redemption = 102% * Face Value of Bonds
Amount Paid at Redemption = 102% * $4,495,000
Amount Paid at Redemption = $4,584,900

Unamortized Discount = Face Value of Bonds - Carrying Value of Bonds
Unamortized Discount = $4,495,000 - $4,420,100
Unamortized Discount = $74,900

ekkarill92 answered 1 year ago
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