Question:
Prepare journal entries to record the following retirement. (Show computations and round to the
nearest dollar.)
The December 31, 2014 balance sheet of Wolfe Co. included the following items:
7.5% bonds payable due December 31, 2022...................................$2,000,000
Unamortized discount on bonds payable.............................................80,000
The bonds were issued on December 31, 2012 at 95, with interest payable on June 30 and December 31.
(Use straight-line amortization.)
On April 1, 2015, Wolfe retired $400,000 of these bonds at 101 plus accrued interest.
Answer:
Interest Expense................................................................................... 8,000
Cash ($400,000 × 7.5% × 3/12)............................................. 7,500
Discount on Bonds Payable ($80,000 × 1/5 × 1/8 × 3/12).....500
BondsPayable...................................................................................400,000
Loss on Redemption of Bonds...........................................................19,500
Discount on Bonds Payable [(1/5 × $80,000) – $500]...........15,500
Cash...................................................................................... 404,000
From December 2014 to December 2022, 8 years, 1/8 is one year out of 8 years.
Prepare journal entries to record the following retirement. (Show computations and round to the
nearest dollar.)
The December 31, 2014 balance sheet of Wolfe Co. included the following items:
7.5% bonds payable due December 31, 2022...................................$2,000,000
Unamortized discount on bonds payable.............................................80,000
The bonds were issued on December 31, 2012 at 95, with interest payable on June 30 and December 31.
(Use straight-line amortization.)
On April 1, 2015, Wolfe retired $400,000 of these bonds at 101 plus accrued interest.
Answer:
Interest Expense................................................................................... 8,000
Cash ($400,000 × 7.5% × 3/12)............................................. 7,500
Discount on Bonds Payable ($80,000 × 1/5 × 1/8 × 3/12).....500
BondsPayable...................................................................................400,000
Loss on Redemption of Bonds...........................................................19,500
Discount on Bonds Payable [(1/5 × $80,000) – $500]...........15,500
Cash...................................................................................... 404,000
From December 2014 to December 2022, 8 years, 1/8 is one year out of 8 years.
