PLEASE HELP WITH THE 2 MISSING JOURNAL ENTRIES Three years ago American Insulati

Question

PLEASE HELP WITH THE 2 MISSING JOURNAL ENTRIES

Three years ago American Insulation Corporation issued 10 percent, $890,000, 10-year bonds for $815,000. Debt issue costs were $9,000. American Insulation exercised its call privilege and retired the bonds for $880,000. The corporation uses the straight-line method both to determine interest and to amortize debt issue costs.

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.)

PLEASE HELP WITH THE 2 MISSING JOURNAL ENTRIES

Three years ago American Insulation Corporation issued 10 percent, $890,000, 10-year bonds for $815,000. Debt issue costs were $9,000. American Insulation exercised its call privilege and retired the bonds for $880,000. The corporation uses the straight-line method both to determine interest and to amortize debt issue costs.

Explanation / Answer

Discount on bond = 890000-815000= 75000

Discount amortised = 75000/10 = 7500 per year .So total discount amortised = 7500*3 = 22500

Unamortised bond discount = 75000-22500 = 52500

2)Debt issue cost amortisationper year = 9000/10= 900 per year .so total amortisation = 900*3 = 2700

Unamortised debt issue cost= 9000-2700 = 6300

Date Account Debit credit Bond payable 890000 loss on early extinguishment 48800 cash 880000 Discount in bond payable 52500 Unamortised debt issue cost 6300

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.