Homework Answers
- Journal entry for payment of bond interest:
| Jan 1 | Interest payable | $134550 | |
| Cash | $134550 | ||
| (Bond interest paid) |
- Journal entry to record redemption of bonds:
| Jan 1 | Bonds payable | $554,000 | |
| Loss on redemption of bonds | $11,080 | ||
| Cash | $565,080 | ||
| (Redemption of bonds) |
explanation:-
Assuming face value of bond = $100
no. of bonds = 554,000/100 = 5540 bonds.
loss on redemption of each bond = 102 - 100 = $2
Total loss = 5540 bonds * $2 = $11,080
- Journal entry to record accural of interest
| Dec 31 | Interest expense | $84,690 | |
| Interest payable | $84,690 | ||
| (accural of interest on bonds) |
explanation:-
Bonds payable as on December 31, 2019 = $1,495,000
Redemption of bonds on January 1, 2019 = $554,000
Bonds payable as on Decermber 31, 2019
= $1,495,000 - 554,000 = $941,000
Interest accrued = $941,000 x 9% = $84,690
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A)
B)
C)
D)
E)
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