Question

White the journal entries necessary to record the following events January 1, 2018 issued 5600,000 of 5 year, 6% bonds at a price of 98. Interest on the bonds is payable semiannually on July and January 1. The market rate of interest at the time of the issue was 6.5%. The bonds are callable after 1 year at a price of 102 July 1. 2018 Paid semiannual interest on bonds. (Use effective interest rate amortization) Amortization Table Carrying value Cash paid (A) Interest Expense (B) Amortization (A-B) Date July 1 January 1 January 1, 2019 Paid semiannual interest on bonds and, immediately following the payment, called $300,000 of the issue. Date Account Titles Debit Credit

Answer 1

Solution:

Amortization table
Date	Cash paid (A)	Interest expense (B)	Amortization (A-B)	Carrying Value
1-Jul	$18,000	$19,110	$1,110	$589,110
1-Jan	$18,000	$19,146	$1,146	$590,256

Journal Entries
Date	Particulars	Debit	Credit
1-Jan-18	Cash Dr	$588,000.00
	Discount on bond payable Dr	$12,000.00
	To Bonds payable		$600,000.00
	(To record issue of bond at discount)
1-Jul-18	Interest Expense Dr	$19,110.00
	To Discount on bond payable		$1,110.00
	To Cash		$18,000.00
	(Being first semiannual interest payment made and discount amortized)
1-Jan-19	Interest Expense Dr	$19,146.00
	To Discount on bond payable		$1,146.00
	To Cash		$18,000.00
	(Being first semiannual interest payment made and discount amortized)
1-Jan-19	Bond payable Dr	$300,000.00
	Loss on retirement of bond Dr	$10,872.00
	To Discount on bond payable [($600,000 - $590,256)/2]		$4,872.00
	To Cash		$306,000.00
	(To record early retirement of bond)