Question
In: Accounting
P10.5A (LO 3, 4), AP Malcolm Company sold $6,000,000, 7%, 15-year bonds on January 1, 2022....
P10.5A
(LO 3, 4), AP Malcolm Company sold $6,000,000, 7%, 15-year bonds on January 1, 2022. The bonds were dated January 1, 2022, and pay interest on December 31. The bonds were sold at 98.
Instructions
a.
Prepare the journal entry to record the issuance of the bonds on January 1, 2022.
b.
At December 31, 2022, $8,000 of the bond discount had been amortized. Show the long-term liability balance sheet presentation of the bond liability at December 31, 2022.
c.
At January 1, 2024, 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 year had already been paid.
|
Loss |
$224,000 |
Solutions
Expert Solution
a) Journal entry
| date | account and explanation | Debit | Credit |
| Jan 1,2022 | Cash (6000000*.98) | 5880000 | |
| Discount on bonds payable | 120000 | ||
| Bonds payable | 6000000 |
b) Balance sheet
| Long term liabilities | ||
| Bonds payable | 6000000 | |
| Less: Discount on bonds payable | -112000 | 5888000 |
c) Journal entry
| date | account and explanation | Debit | Credit |
| Bonds payable | 6000000 | ||
| Loss on redemption | 224000 | ||
| Discount on bonds payable | 104000 | ||
| Cash | 6120000 |
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