Three years ago on January 1, 2022, American Insulation Company issued 10%, $800,000, 10-year bonds for $770,000. Debt transaction costs were $3,000. American Insulation exercised its call privilege on December, 31, 2024, and retired the bonds for $790,000. Interest was paid semiannually. Debt transaction costs were amortized over the tenure of the bonds using the effective interest method. The effective interest rate per semiannual period was 5.34%. Required: 1. Prepare the journal entry to record the issue of the bonds. 2. Prepare the bond amortization table from the date of issue to the date of the call of the bonds. 3. Prepare the journal entry to record the call of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Three years ago on January 1, 2022, American Insulation Company issued 10%, $800,000, 10-year bonds for $770,000. Debt transaction costs were $3,000. American Insulation exercised its call privilege on December, 31, 2024, and retired the bonds for $790,000. Interest was paid semiannually. Debt transaction costs were amortized over the tenure of the bonds using the effective interest method. The effective interest rate per semiannual period was 5.34%. Required: 1. Prepare the journal entry to record the issue of the bonds. 2. Prepare the bond amortization table from the date of issue to the date of the call of the bonds. 3. Prepare the journal entry to record the call of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Three years ago on January 1, 2022, American Insulation Company issued 10%, $800,000, 10-year bonds for $770,000. Debt
transaction costs were $3,000. American Insulation exercised its call privilege on December, 31, 2024, and retired the bonds for
$790,000. Interest was paid semiannually. Debt transaction costs were amortized over the tenure of the bonds using the effective
interest method. The effective interest rate per semiannual period was 5.34%.
Required:
1. Prepare the journal entry to record the issue of the bonds.
2. Prepare the bond amortization table from the date of issue to the date of the call of the bonds.
3. Prepare the journal entry to record the call of the bonds. (If no entry is required for a transaction/event, select "No journal entry
required" in the first account field.)
Complete this question by entering your answers in the tabs below.
Required 1
Required 2 Required 3
Prepare the bond amortization table from the date of issue to the date of the call of the bonds. (Enter your answers in whole
dollars.)
Period
1
2
3
4
LO
5
со
6
Cash
Interest
Effective
Interest
Balance
Increase in Outstanding
Balance
5.34% ×
Discount
5% × principal outstanding
reduction
balance
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