Question
In: Accounting
On January 1, 2009, General Bell Corp. issued at 97, 8% bonds with a par value...
On January 1, 2009, General Bell Corp. issued at 97, 8% bonds with a par value of $800,000, due in 10 years. Interest is payable semiannually on June 30 and December 31 of each year. In addition General Bell incurred bond issue costs totalling $16,000. 3 years after the issue date, on January 1, 2012, General Bell calls the entire issue at 101 and cancels it. General Bell amortizes discounts/premiums, using the straight-line method.
Required:
1) Record the necessary journal entries on:
a. January 1, 2009
b. June 30 and December 31, 2009
c. January 1, 2012
2) Assume that the bond was sold on March 1, 2009 for the same price as above plus accrued interest and record the necessary journal entries on:
a. March 1, 2009
b. June 30 and December 31, 2009
c. January 1, 2012
Solutions
Expert Solution
| Date | Accounts Title | Dr | Cr |
| Jan 1 2009 | Cash (bal fig) | $760,000 | |
| a | Discount On Bonds Payable (800000/100*3) | 24000 | |
| Bond Issuance Cost | $16,000 | ||
| Bonds Payable | $800,000 | ||
| (to record bond issued) | |||
| b | |||
| 30-Jun-09 | Interest expenses (bal fig) | 30000 | |
| Discount On Bonds Payable 24000/20 period | 1200 | ||
| Bond Issuance Cost (16000/20) | 800 | ||
| Cash (800000*4%) | 32000 | ||
| (being interest paid recorded) | |||
| De 31 2009 | Interest expenses (bal fig) | 30000 | |
| Discount On Bonds Payable 24000/20 period | 1200 | ||
| Bond Issuance Cost (16000/20) | 800 | ||
| Cash (800000*4%) | 32000 | ||
| (being interest paid recorded) | |||
| c | |||
| Jan 1 2012 | Bonds payable | $800,000 | |
| Loss on Redemption (bal fig) | $36,000 | ||
| Discount On Bonds Payable 24000-(24000/20*6) | 16800 | ||
| Bond Issuance Cost 16000-(16000/20*6) | 11200 | ||
| Cash (800000*101%) | 808000 | ||
| ans 2 | |||
| 1-Mar | Cash (bal fig) | $760,000 | |
| Discount On Bonds Payable (800000/100*3) | 24000 | ||
| Bond Issuance Cost | $16,000 | ||
| Interest expenses (800000*8%*2/12) | $10,667 | ||
| Bonds Payable | $800,000 | ||
| Interest payable | $10,667 | ||
| (to record bond issued) | |||
| b | |||
| 30-Jun-09 | Interest expenses (bal fig) | 19333 | |
| Interest payable (800000*8%*2/12) | 10667 | ||
| Discount On Bonds Payable 24000/20 period | 1200 | ||
| Bond Issuance Cost (16000/20) | 800 | ||
| Cash (800000*4%) | 32000 | ||
| (being interest paid recorded) | |||
| De 31 2009 | Interest expenses (bal fig) | 30000 | |
| Discount On Bonds Payable 24000/20 period | 1200 | ||
| Bond Issuance Cost (16000/20) | 800 | ||
| Cash (800000*4%) | 32000 | ||
| (being interest paid recorded) | |||
| c | |||
| Jan 1 2012 | Bonds payable | $800,000 | |
| Loss on Redemption (bal fig) | $36,000 | ||
| Discount On Bonds Payable 24000-(24000/20*6) | 16800 | ||
| Bond Issuance Cost 16000-(16000/20*6) | 11200 | ||
| Cash (800000*101%) | 808000 |
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