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

ekkarill92 answered 2 years ago
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