Question

At 31 December 20X8, Northern Resources Ltd. reports the following on its statement of financial position:

Bonds payable, 4%, interest payable semi-annually on 30 June and 30 December	$	9,400,000
Discount on bonds payable		470,000
	$	8,930,000

The effective interest rate, or market interest rate, was 6% on issuance. On 1 March 20X9, 30% of the bond issue was bought back in the open market and retired at 101 plus accrued interest. The following table relates to 20X9 (numbers have been rounded):

		Amortization Schedule, Effective-Interest Method:
Interest Period	Cash Interest		Interest Expense		Premium Amortization		Balance Unamortized Premium		Carrying Amount of Bonds
reporting date(above)							$	470,000	$	8,930,000
1	$	188,000	$	267,900	$	79,900		390,100		9,009,900
2		188,000		270,297		82,297		307,803		9,092,197

Required:
Provide the entries to record:
1. Interest paid to the date of retirement on the 30% of bond retired. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amount.)

2. Bond retirement. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amount.)

3. Interest on 30 June 20X9 for the portion of the bond still outstanding. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amount.

Answer 1

	Date	Account titles and explantion	Debit	Credit
(1)	01-Mar-19	Interest A/c	$27,277		(9092197*6%*2/12)*30%
		Cash		$18,800	(9,400,000*4%*2/12)*30%
		Discount on bonds payable(amortization)		$8,477
		(Payment of interest for 30% bonds)
(2)	01-Mar-19	Bonds payable	$2,820,000		(9,400,000*30%)
		Loss on redeemption of bonds	$112,064		(balancing figure)
		Cash		$2,848,200	(9,400,000/100*101*30%)
		Discount on bond payables		$83,864	(307803)*30%-$8,477)
		(redeemption of 30% bond recorded)
(3)	30-Jun-19	Interest A/c	$190,936		(9092197*70%)*6/12*6%
		Cash		$131,600	((9,400,000*70%)*6/12)*4%
		Discount on bonds payable(amortization)		$59,336	(balancing figure)
		(Payment of interest for 70% bonds remaining)