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  3. a company issues 800,000 of 10% bonds dated 6/1/16

A company issues 800,000 of 10% bonds dated 6/1/16 which are due 6/1/26. interest is paid...

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Accounting

A company issues 800,000 of 10% bonds dated 6/1/16 which are due6/1/26. interest is paid annually at 6/1. the market rate for thebond is 9.75%

on 5/1/19 the company retired all of these bonds for 802,000plus accrued interest.

prepare journal entries from 2016 to 2019

Answer & Explanation Solved by verified expert
4.1 Ratings (563 Votes)

Date Account tittle Debit $ Credit $
2016
6/1/2016 Cash               800,000
Bond payable                     800,000
( 10%, bond issued at face value and cash collected )
12/31/2016 Interest expenses ( $ 800,000 x 10% x 6/12 )                 40,000
Interest Payable                       40,000
( Interest accrued for the period of six months )
2019
5/1/2019 Bond payable               800,000
Interest expenses ( $ 800,000 x 10% x 5/12 )                 33,333
Interest payable ( $ 800,000 x 10% x 6/12 )                 40,000
Amount paid in excess of facevalue ( $ 802,000 - $ 800,000)                   2,000
Cash ( $ 802,000 + $ 73,333)                     875,333
( Retirement of bond for $ 802,000 plus interest for the period from 6/1/18 till 5/1/19- 11 months )

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