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16 July, 20:28

A company issued $1,000,000 of 30-year, 8% callable bonds on April 1, with interest payable on April 1 and October 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions:

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  1. 16 July, 22:39
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    The journal entries are shown below:

    1. Cash A/c Dr $1,000,000

    To Bonds payable A/c $1,000,000

    (Being the bond is issued)

    2. Interest expense A/c Dr $40,000

    To Cash A/c $40,000

    (Being the interest expense is recorded)

    The computation is shown below:

    = ($1,000,000 * 8% * 6 months : 12 months)

    = $40,000

    3. Bond payable A/c Dr $1,000,000

    Loss on redemption of bond A/c Dr $40,000

    To Cash A/c $1,040,000

    (Being the bond issue called is recorded)
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