Question

Kindly show every step please. Thank you!

1. Devon Harris Company sells 10% bonds having a maturity value of $2,000,000. The market rate is 12% on the

bonds. The bonds are dated January 1, 2017, and mature January 1, 2022. Interest is payable annually on

January 1. Bond issue cost is $10,000.   Set up the amortization schedule and complete all required journal

entries for 2017 and 2018.

2. On Jan 1, 2017, Henderson Corp retired $500,000 of bonds at 99. At the time of retirement, the

unamortized premium was $15,000 and unamortized bond issue costs were $5,250.

a.Prepare the company’s journal entries for the retirement of this bond.

Answer 1

Henderson Corp :

Bonds Payable a/c                      Dr. 500000

Premium on Bonds Payable a/c    Dr. 15000

           To Unamortized Bonds issue cost         5250

           To Gain on Redemption of Bonds          14750

           To Cash                                             495000

( 500000 x 0.99 = 495000)