Solution 1:
Period | Changes during the period | Ending bond liability balances | ||||
Cash Paid | Discount Amortized | Interest expense | Bond payable | Discount on bond payable | Carrying value | |
1-Jan-18 | $640,000 | $16,795 | $623,205 | |||
31-Dec-18 | $38,400 | $5,598 | $43,998 | $640,000 | $11,197 | $628,803 |
31-Dec-19 | $38,400 | $5,598 | $43,998 | $640,000 | $5,599 | $634,401 |
31-Dec-20 | $38,400 | $5,599 | $43,999 | $640,000 | $0 | $640,000 |
Solution 2-5:
Journal Entries - Loop Raceway | ||||
Event | Date | Particulars | Debit | Credit |
1 | 1-Jan-18 | Cash Dr | $623,205.00 | |
Discount on bond payable Dr | $16,795.00 | |||
To Bond Payable | $640,000.00 | |||
(To record issue of bond) | ||||
2 | 31-Dec-18 | Interest expense Dr | $43,998.00 | |
To Cash | $38,400.00 | |||
To Discount on bond payable | $5,598.00 | |||
(To record semiannual interest payment and discount amortization) | ||||
3 | 31-Dec-19 | Interest expense Dr | $43,998.00 | |
To Cash | $38,400.00 | |||
To Discount on bond payable | $5,598.00 | |||
(To record semiannual interest payment and discount amortization) | ||||
4 | 31-Dec-20 | Interest expense Dr | $43,999.00 | |
Bond Payable Dr | $640,000.00 | |||
To Cash | $678,400.00 | |||
To Discount on bond payable | $5,599.00 | |||
(To record interest payment to retiring bond holders) | ||||
5 | 1-Jan-20 | Bond Payable Dr | $640,000.00 | |
To Discount on bond payable | $5,599.00 | |||
To Cash | $620,800.00 | |||
To Gain on bond retirement | $13,601.00 | |||
(To record early retirement of bond) |
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