The Kell Company issued $600,000 of 10 year, 12% bonds at 99. The bonds were issued...

The Kell Company issued $600,000 of 10 year, 12% bonds at 99. The bonds were issued on January 1, 20x1, with interest payable semiannually on June 30 and December 31.

REQUIRED: Present the journal entries for each of the following:

The issuance of the bonds.

The payment of interest for the first six months.

Amortization for the first six months.

The retirement of 1/2 the bonds at 102 on January 1, 20x5.

Expert Solution

Par value of bonds			6,00,000
Issue price of bonds (600,000*99%)	594000
Discount on bonds			6000
Divide: Number of periods		10
Discount amortized each period		600

Discount amortized till 01.01.05 (600*8)	4800
Unamortized Discount on 01.01.05	1200

Journal entries
S.no.	Accounts title and explanations		Debit $	Credit $
01.01.01	Cash account			594000
	Discount on bonds payable		6000
	Bonds payable				600000
	(for issuance of bonds)
30.06.01	Interest expenses (600,00012%6/12)	36000
	Cash					36000
	(for payment of interest)
30.06.01	Interest expense			600
	Discount on bonds payable			600
	(for amortization of discount)

01.01.05	Bonds payable (600,000*1/2)		3,00,000
	Loss on redemption of bonds		6600
	Discount on Bonds payable (1200*1/2)		600
	Cash account (300,000*102%)		306000
	(for redemption of bonds)

ekkarill92 answered 1 year ago

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