Question

Cupola Fan Corporation issued 12%, $560,000, 10-year bonds for $529,000 on June 30, 2021. Debt issue costs were $3,100. Interest is paid semiannually on December 31 and June 30. One year from the issue date (July 1, 2022), the corporation exercised its call privilege and retired the bonds for $539,000. The corporation uses the straight-line method both to determine interest expense and to amortize debt issue costs. Required: 1. to 4. Prepare the journal entries to record the issuance of the bonds, the payment of interest and amortization of debt issue costs on December 31, 2021 and June 30, 2022 and call of the bonds according to IFRS. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No 1 Credit Date June 30, 2021 Answer is complete but not entirely correct. General Journal Debit Cash 525,900 Bonds payable 525,900 2 December 31, 202 Interest expense 35,150 $ Bonds payable Cash 1,550 33,600 3 June 30, 2022 35,150 Interest expense Bonds payable 1,550 X 33,600 Cash July 01, 2022 Bonds payable Loss on early extinguishment Cash 529,310 9,690 539,000

Answer 1

Journal entry

No	Date	General Journal	Debit	Credit
1	June 30,2021	Cash	525900
		Bonds payable		525900
2	Dec 31,2021	Interest expense	32050
		Bonds payable	1550
		Cash		33600
3	June 30,2022	Interest expense	32050
		Bonds payable	1550
		Cash		33600
4	July 01,2022	Bonds payable	529310
		Loss on early extinguishment	9690
		Cash		539000