In: Accounting
A company issues 800,000 of 10% bonds dated 6/1/16 which are due 6/1/26. interest is paid annually at 6/1. the market rate for the bond is 9.75%
on 5/1/19 the company retired all of these bonds for 802,000 plus accrued interest.
prepare journal entries from 2016 to 2019
Date | Account tittle | Debit $ | Credit $ |
2016 | |||
6/1/2016 | Cash | 800,000 | |
Bond payable | 800,000 | ||
( 10%, bond issued at face value and cash collected ) | |||
12/31/2016 | Interest expenses ( $ 800,000 x 10% x 6/12 ) | 40,000 | |
Interest Payable | 40,000 | ||
( Interest accrued for the period of six months ) | |||
2019 | |||
5/1/2019 | Bond payable | 800,000 | |
Interest expenses ( $ 800,000 x 10% x 5/12 ) | 33,333 | ||
Interest payable ( $ 800,000 x 10% x 6/12 ) | 40,000 | ||
Amount paid in excess of facevalue ( $ 802,000 - $ 800,000) | 2,000 | ||
Cash ( $ 802,000 + $ 73,333) | 875,333 | ||
( Retirement of bond for $ 802,000 plus interest for the period from 6/1/18 till 5/1/19- 11 months ) |