Nivan Co. issued $292,000 of 4 percent, 10-year, callable bonds on January 1, 20

Question

Nivan Co. issued $292,000 of 4 percent, 10-year, callable bonds on January 1, 2016, at their face value. The call premium was 1 percent (bonds are callable at 101). Interest was payable annually on December 31. The bonds were called on December 31, 2020. Required Prepare the journal entries to record the bond issue on January 1, 2016, and the bond redemption on December 31, 2020. Entries for accrual and payment of interest are not required. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the bond issue on January 1, 2016. Note: Enter debits before credits. Date General Journal Debit Credit January 01, 2016

Explanation / Answer

Answer: Journal entries for issue of bond

Date General journal Debit Credit January 1,2016 Bank/Cash account...........Dr $292,000 To Bond payable account $292,000 (Being 2920 bond issued at face value $100 per bond) December 31,2016 Interest accrued-no journal entry required December 31,2016 Interest paid-no journal entry required December 31,2017 Interest accrued-no journal entry required December 31,2017 Interest paid-no journal entry required December 31,2018 Interest accrued-no journal entry required December 31,2018 Interest paid-no journal entry required December 31,2019 Interest accrued-no journal entry required December 31,2019 Interest paid-no journal entry required December 31,2020 Interest accrued-no journal entry required December 31,2020 Interest paid-no journal entry required December 31, 2020 Bond payable account.........Dr $2,92,000 Premium on redumtion account...Dr    $2920 To Cash/Bank account $2,94,920 (Being 2920 bond redeemed at value $101 per bond) December 31, 2020 Profit and loss account.....Dr $2920 To Premium on redumtion account $2920 (Being loss on redumption transer to profit and loss account)

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