Question

Cupola Fan Corporation issued 12%, $590,000, 10-year bonds for $556,000 on June 30, 2018. Debt issue costs were $3,400. Interest is paid semiannually on December 31 and June 30. One year from the issue date (July 1, 2019), the corporation exercised its call privilege and retired the bonds for $566,000. The corporation uses the straight-line method both to determine interest expense and to amortize debt issue costs.

Required:
Prepare the journal entry to record the issuance of the bonds, the payment of interest and amortization of debt issue costs on December 31, 2018 and June 30, 2019 and call of the bonds according to IFRS. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Solution:

Journal Entries - Cupola Fan Corporation
Date	Particulars	Debit	Credit
30-Jun-18	Cash Dr	$556,000.00
	Discount on issue of bond Dr	$34,000.00
	To Bond Payable		$590,000.00
	(To record issue of bond at discount)
30-Jun-18	Bond Issue expense Dr	$3,400.00
	To Cash		$3,400.00
	(To record bond issue expense)
31-Dec-18	Interest expense Dr	$37,270.00
	To Cash		$35,400.00
	To Discount on issue of bond ($34,000/20)		$1,700.00
	To Bond Issue Expense ($3,400/20)		$170.00
	(To record interest expense and discount amortization)
30-Jun-19	Interest expense Dr	$37,270.00
	To Cash		$35,400.00
	To Discount on issue of bond ($34,000/20)		$1,700.00
	To Bond Issue Expense ($3,400/20)		$170.00
	(To record interest expense and discount amortization)
1-Jul-19	Bond Payable Dr	$590,000.00
	Loss on retirement of bond Dr	$9,660.00
	To Cash		$566,000.00
	To Discount on issue of bond		$30,600.00
	To Bond Issue Expense		$3,060.00
	(To record retirement of bond)