On January 1, 2014, Buer Company issued 500 10 year bonds with $1,000 face value
ID: 2424786 • Letter: O
Question
On January 1, 2014, Buer Company issued 500 10 year bonds with $1,000 face value for each bond at 102. Interest is payable on January 1 and July 1 at 10%. On April 1, 2015, Buer Company reacquires and retires 50 of its own $1,000 bonds at 98 plus accrued interest. The fiscal period for Buer Company is the calendar year. Required: Prepare entries to record A) The issuance of the bonds, B) the interest payments and adjustments relating to the debt in 2014, and C) the reacquisition and retirement of bonds in 2015. Assume the premium or discount is amortized on a straight line basis. Debit Credit A) Issuance of the bonds 1/1/2014 B) Interest payments during 2014 6/30/2014 12/31/2014 C) Reacquisition of the bonds in 2015 4/1/2015 On January 1, 2014, Buer Company issued 500 10 year bonds with $1,000 face value for each bond at 102. Interest is payable on January 1 and July 1 at 10%. On April 1, 2015, Buer Company reacquires and retires 50 of its own $1,000 bonds at 98 plus accrued interest. The fiscal period for Buer Company is the calendar year. Required: Prepare entries to record A) The issuance of the bonds, B) the interest payments and adjustments relating to the debt in 2014, and C) the reacquisition and retirement of bonds in 2015. Assume the premium or discount is amortized on a straight line basis. Debit Credit A) Issuance of the bonds 1/1/2014 B) Interest payments during 2014 6/30/2014 12/31/2014 C) Reacquisition of the bonds in 2015 4/1/2015Explanation / Answer
Journal Entry Date Particulars Dr Amt. Cr. Amt 1/1/2014 Cash Dr. 510,000 To Bonds - 10% 500,000 To Premium on Issue of Bonds 10,000 (Issue of Bonds at premium) 6/30/2014 Interest Exp. Dr. 25,000 To Cash 25,000 (Half yearly interest paid on Bonds - $500000 x 10% X 6/12) 12/31/2014 Interest Exp. Dr. 25,000 To Cash 25,000 (Half yearly interest paid on Bonds - $500000 x 10% X 6/12) 12/31/2014 Premium on Issue of Bonds Dr. 1,000 To Income Statement / Retained Profits 1,000 (Premium on issue of bonds is amortised and transferred to Income Statement) 4/1/2015 Interest Exp. Dr. 8,333 To Interst Payble 8,333 (interst Due on the Bonds reacquires) 4/1/2015 Bonds-10% Dr. 250,000 Interst Payable Dr. 8,333 To Cash 253,333 To Discount on retirement of Bonds 5,000 (Bonds Retire at discount)
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