Question

Entries for Bonds Payable, including bond redemption The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year: Year 1 July 1. Issued $2,790,000 of five-year, 9% callable bonds dated July 1, Year 1, at a market (effective) rate of 11%, receiving cash of $2,579,701. Interest is payable semiannually on December 31 and June 30. Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $21,030 is combined with the semiannual Interest payment Dec. 31. Closed the Interest expense account. Year 2 June 30. Paid the semiannual interest on the bonds. The bond discount amortization of $21,030 is combined with the seminnual interest payment Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $21,030 is combined with the semiannual interest payment, Dec. 31. Closed the interest expense account. Year 3 June 30. Recorded the redemption of the bonds, which were called at 98. The balance in the band discount account is $126,179 after payment of interest and amortization of discount have been recorded. (Record the redemption only.) Required: 1. Journalize the entries to record the foregoing transactions. If an amount box does not require an entry, leave it blank or enter of When required, round your answers to the nearest dollar Date Account Debit Credit Year July 1 Cash Discount on bonds payable ✓ Bonds payable Check My Work Previous

Answer 1

Journal entries
S.no.	Accounts title and explanations		Debit $	Credit $
01-Jul	Cash				25,79,701
	Discount on bonds payable		2,10,299
	Bonds payable				27,90,000
	(for issuance of bonds)
31-Dec	Interest expense			1,46,580
	Discount on bonds payable			21,030
	Cash account (2790,000*9%*6/12)		1,25,550
	(for interest paid)
Dec-31	Income Summary			1,46,580
	Interest expense				1,46,580
	(for closing the interest expense)
Year-2
Jun-30	Interest expense			1,46,580
	Discount on bonds payable			21,030
	Cash account (2790,000*9%*6/12)		1,25,550
	(for interest paid)
Dec-31	Interest expense			1,46,580
	Discount on bonds payable			21,030
	Cash account (2790,000*9%*6/12)		1,25,550
	(for interest paid)
Dec-31	Income summary			2,93,160
	Interest expense (146580+146580)		2,93,160
	(for closing interest expense)
Year3
Jun-30	Bonds payable			27,90,000
	Loss on redemption of bonds		70,379
	Discount on bonds payable			1,26,179
	Cash account	(2790,000*98%)		2734200
	(for redemption of bonds)
Req 2.
			Interest expense
YEAR-1			1,46,580
YEAR -2			2,93,160
Req 3.
Carrying amount of bonds on Dec31 Year-2
Bonds payable			27,90,000
Less: Unamortized bond discount	1,47,209
	(210299-(21030*3))
Net Bonds payable (Carrying amount)	26,42,791