c. Accrual of bond interest expense at December 31. d. Payment of the semiannual interest on May 1 of the following year. e. Retirement of $350,000 of the bonds at 101 on May 1, Year 2 (immediately after the interest payment on that date). Round to the nearest dollar. Use 360 days for calculations. General Journal Date Description Debit Credit a. Oct.1 Cash 830,000 $
c. Accrual of bond interest expense at December 31. d. Payment of the semiannual interest on May 1 of the following year. e. Retirement of $350,000 of the bonds at 101 on May 1, Year 2 (immediately after the interest payment on that date). Round to the nearest dollar. Use 360 days for calculations. General Journal Date Description Debit Credit a. Oct.1 Cash 830,000 $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Hello, I am struggling with letter E of this assignement. I am not sure how to calculate the loss on bond retirement.
Transcribed Image Text:Bonds Payable Journal Entries; Issued at Par Plus Accrued Interest
Askew, Inc., which closes its books on December 31, is authorized to issue $800,000 of nine percent, 15-year
bonds dated May 1, with interest payments on November 1 and May 1.
Required
Prepare journal entries to record the following events, assuming that the bonds were sold at 100 plus accrued
interest on October 1:
a. The bond issuance.
b. Payment of the first semiannual period's interest on November 1.
C. Accrual of bond interest expense at December 31.
d. Payment of the semiannual interest on May 1 of the following year.
e. Retirement of $350,000 of the bonds at 101 on May 1, Year 2 (immediately after the interest payment on that
date). Round to the nearest dollar. Use 360 days for calculations.
General Journal
Date
Description
Debit
Credit
a.
Oct. 1
Cash
830,000 v $
Bonds Payable
800,000 v
Bond Interest Payable
30,000 v
Issuance of bonds at 100 plus accrued interest.
b.
Nov.1
Bond Interest Payable
30,000 v
Bond Interest Expense
6,000 v
Cash
36,000 v
To record semiannual interest payment.
C.
Dec.31 Bond Interest Expense
12,000 v
Bond Interest Payable
12,000 v
To accrue interest expense.
d.
May 1 Bond Interest Payable
12,000 v
Bond Interest Expense
24,000 v
Cash
36,000
To record semiannual interest payment.
e.
May 1 Bonds Payable
350,000 v
Loss on Bond Retirement
1,200 x
Cash
To record retirement of bonds.
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