Question

3. On January 1, 2021 Clayton Co. issued $1,300,000 of 20-year, 9 % bonds , for $1,225,000. Interest is payable annually on January 1. The company uses the straight-line method to amortization any bond discount or premium. REQUIRED (16 points) Prepare journal entries to record the following (round to nearest dollar.) Jan 1, 2021 Issuance of the bonds on January 1, 2021 Dec 31, 2021 Recorded accrued interest Jan 1, 2022 Jan 1, 2022 Payment of interest After payment of interest on Jan. 1, 2022 the bonds were retired at 98.

Answer 1

Journal Entries Date Account Title and Explaination Debit Credit Post. Ref. Jan.1 2021 $ $ 1,225,000.00 75,000.00 Cash Discount on Bonds Payable Bonds Payable (To record issue of Bonds) $ 1,300,000.00 $ 120,750.00 Dec.31 Interest Expense 2021 Discount on Bonds Payable ($75000/20yrs) Interest Payable ($1,300,000x9%) (To record accrued interest expense) $ $ 3,750.00 117,000.00 $ 117,000.00 Jan.1 2022 Interest Payable Cash (To record Payment of Interest) $ 117,000.00 Jan.1 $ 1,300,000.00 $ 45,250.00 2022 Bonds Payable Loss on Retirement Of Bonds Cash Discount on Bonds Payable ($75000-$3750) (To record retirement of bonds) $ $ 1,274,000.00 71,250.00