Homework Answers
a. Following is the journal entry to record the issuance of bond having face value of $7,00,000 at a price of $6,60,000.00
| Date | Account title | Debit $ | Credit $ |
| Jan 1, 2018 | Cash | $6,60,000.00 | |
| Discount on bonds payable | $40,000.00 | ||
| Bond Issue cost | $10,000.00 | ||
| Bond Payable | $7,00,000.00 | ||
| Cash | $10,000.00 | ||
| To record the bond issuance on discount and payment of bond issue costs |
b. The bonds are callable at 96 i.e. 96% the face value of $4,20,000.00
so bond is extinguished at $4,20,000.00 * 96/100 =4,03,200.00
The discount at the time of retirement of bond = $4,20,000.00 - $4,03,000.00 = $17,000.00
so the journal entry is
| Date | Account title | Debit $ | Credit $ |
| Dec 31, 2024 | Bonds Payable | $4,20,000.00 | |
| Discount on bonds payable | $17,000.00 | ||
| Cash | $4,03,000.00 |
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