On January 1, 2020, Laudon Corporation issued $5,000,000 of 10% bonds at 102 due December 31, 2029. Interest on the bonds is payable annually each December 31. The premium on the bonds is being amortized on a straight-line basis. (Straight-line is not materially different in effect from the preferable “effective interest method”.) The bonds are callable at 105, and on January 2, 2024, Laudon called one-half of the bonds and retired them. REQUIRED (Show any calculations at the bottom of the page for full credit!) a) Prepare the journal entry to record the interest payment of the $5,000,000 bonds on December 31, 2023. b) Prepare the journal entry to record the redemption of half of the bonds on January 2, 2024.
On January 1, 2020, Laudon Corporation issued $5,000,000 of 10% bonds at 102 due December 31, 2029.
Interest on the bonds is payable annually each December 31. The premium on the bonds is being amortized
on a straight-line basis. (Straight-line is not materially different in effect from the preferable “effective interest
method”.) The bonds are callable at 105, and on January 2, 2024, Laudon called one-half of the bonds and
retired them.
REQUIRED (Show any calculations at the bottom of the page for full credit!)
a) Prepare the
2023.
b) Prepare the journal entry to record the redemption of half of the bonds on January 2, 2024.
The bond issued at 102 means the bond has issued at premium & issue price is 102% of face value.
| Face value of bond | $50,00,000 |
| Issue Price of bonds ($5000000 * 102%) | $51,00,000 |
| Premium on bond ($5100000 - $5000000) | $1,00,000 |
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