Solution 1: | ||||||
Period | Changes during the period | Ending bond liability balances | ||||
Interest expense | Cash Paid | Discount Amortized | Bond payable | Discount on bond payable | Carrying value | |
1-Jan-18 | $530,000 | $14,706 | $515,294 | |||
31-Dec-18 | $20,612 | $15,900 | $4,712 | $530,000 | $9,994 | $520,006 |
31-Dec-19 | $20,800 | $15,900 | $4,900 | $530,000 | $5,094 | $524,906 |
31-Dec-20 | $20,994 | $15,900 | $5,094 | $530,000 | $0 | $530,000 |
Solution 2 to 5: | ||||
Journal Entries - Surreal Manufacturing | ||||
Event | Date | Particulars | Debit | Credit |
1 | 1-Jan-18 | Cash Dr | $515,294.00 | |
Discount on issue of bond Dr | $14,706.00 | |||
To Bond Payable | $530,000.00 | |||
(To record issue of bond) | ||||
2 | 31-Dec-18 | Interest expense Dr | $20,612.00 | |
To Cash | $15,900.00 | |||
To Discount on issue of bond | $4,712.00 | |||
(To record semiannual interest payment and discount amortization) | ||||
3 | 31-Dec-19 | Interest expense Dr | $20,800.00 | |
To Cash | $15,900.00 | |||
To Discount on issue of bond | $4,900.00 | |||
(To record semiannual interest payment and discount amortization) | ||||
4 | 31-Dec-20 | Interest expense Dr | $20,994.00 | |
Bond Payable Dr | $530,000.00 | |||
To Cash | $545,900.00 | |||
To Discount on issue of bond | $5,094.00 | |||
(To record interest payment to retiring bond holders) | ||||
5 | 1-Jan-20 | Bond Payable Dr | $530,000.00 | |
Loss on retirement of bond Dr | $20,994.00 | |||
To Discount on issue of bond | $5,094.00 | |||
To Cash | $545,900.00 | |||
(To record early retirement of bond) |
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