Question

p10-4A Kershaw Electric sold $6,000,000, 10%, 15 years bonds on January 1, 2017. The bonds were dated January 1, 2017, and paid interest on January 1. The bonds were sold at 98. Instruction (a) Prepare the journal entry to record the issuance of the bonds on January 1, 2017. (b) At December 31,2017, $8,000 of the discount on bonds payable account has been amortized. Show the balance sheet preseentation of the long term liability at December 31, 2017. (c) on January 1, 2019, when the carrying v value of the bonds was &5,896,000, the company redeemed the bonds at 102. Record the redemption of the bonds assuming that interest for the period has already been paid. Note I want the answer only for this question.

What is the amount of discount on bonds payable in part (a)? A. 80,000 B. 100,00. C. 120,000 D. 140,000

Answer 1

Solution:

(a) Prepare the journal entry to record the issuance of the bonds on January 1, 2017.

Date	Account titles and explanation	Debit($)	Credit($)
Jan 1, 2017	Cash A/c Dr	$5,880,000
	Discount on BP A/c Dr	$120,000
	To Bonds payable A/c		$6,000,000

(b) At December 31,2017, $8,000 of the discount on bonds payable account has been amortized. Show the balance sheet presentation of the long term liability at December 31, 2017.

Balance sheet

presentation of the long term liability

at December 31, 2017.

Details	Amount($)	Amount($)
Long term liabilities:
Bonds payable	$6,000,000
Less: Discount on bonds payable ($120,000 - $8,000)	$112,000
Total long term liabilities		$5,888,000

(c) on January 1, 2019, when the carrying value of the bonds was $5,896,000, the company redeemed the bonds at 102. Record the redemption of the bonds assuming that interest for the period has already been paid.

Date	Account titles and explanation	Debit($)	Credit($)
Jan 1, 2017	Bonds payable A/c Dr	$6,000,000
	Loss on redemption of bonds A/c Dr ($5,896,000 - $6,120,000)	$224,000
	To Discount on bonds payable A/c		$104,000
	To cash A/c ($6,000,000*102%)		$6,120,000