Question

FINANCIAL ACCOUNTING II William D. Kidd, Inc. authorized $300,000 of 6%, callable bonds on June 1, 2011. These securities would pay interest annually on each May 31", and they are scheduled to mature on May 31, 2020. On January 2, 2015, Kidd issued all of the bonds in exchange for a building with a fair value of $274,000. The debt was collateralized by machinery and equipment with a market value of $412,000. The bond investors paid all accrued interest in cash. On August 31, 2017, Kida called the bonds and paid the bondholders $1,100 for each $1,000 bond outstanding. Kidd also paid all interest payable as of that date. Provide the journal entries relating to the bonds that Kidd would make on June 1, 2011, January 2, 2015, and August 31, 2017.

Answer 1

Answer 1) June 1, 2011, No entries are to be passed for Authorized Callable Bonds

On issue of Bonds against Building

Date Particulars Amount Debit($) Amount Debit($)

January 2, 2015   Building A/c Dr 274,000

Discount on issue of Bonds Dr. 26,000

To 6% Bonds A/c 300,000

(Being bonds Issued against purchased of land at discount)

On Redemption of Bonds on

Date Particulars Amount Debit($) Amount Debit($)

August 31, 2017   6 % Bonds A/c Dr 300,000

Premium on Redemption A/c Dr. 30,000

To Bank A/c 330,000

(Being Redemption of bonds at premium of 10%)