Question

1. On 09-01-15, O issued $8,000,000 of its 6%, 5-year callable term bonds dated 09-30-15. The bonds pay interest every September 01 and March 01. O can call in the bonds any time after 09-01-18 at 101. At the time O issued the bonds, similar bonds paid 6%. Upon issuing the bonds, O incurred and paid $74,000 of bond issuance costs. O uses the effective-interest method to amortize any bond discount or premium. O prepares AJEs only as of every December 31. On July 01, 2019, G called in $6,000,000 of the bonds at the call price of 101 plus interest. Prepare the entries O should make on:
   1. 09-01-15
   2. 12-31-15
   3. 03-01-16
   4. 09-01-16
   5. 07-01-19
   6. 09-01-19
   7. 12-31-19
   8. 03-01-20
   1. 09-01-20

Answer 1

Trans	General Journal	Debit	Credit
1-Sep	Cash	$ 8,000,000.00
	Bonds payable		$ 8,000,000.00
31-Dec	Interest Expense	$      160,000.00
	Interest payable on bond		$      160,000.00
1-Mar	Interest payable on bond	$      160,000.00
	Interest Expenses	$        80,000.00
	Cash		$      240,000.00
1-Sep	Interest Expenses	$      240,000.00
	Cash		$      240,000.00
1-Jul	Loss on Redemption	$        60,000.00
	Bonds Payable	$ 6,000,000.00
	Cash		$ 6,060,000.00
1-Sep	Interest Expenses	$      180,000.00
	Cash		$      180,000.00
31-Dec	Interest Expense	$        40,000.00
	Interest payable on bond		$        40,000.00
1-Mar	Interest payable on bond	$        40,000.00
	Interest Expenses	$        20,000.00
	Cash		$        60,000.00
1-Sep	Interest Expenses	$        60,000.00
	Cash		$        60,000.00