Slocombe Company sold $6,600,000, 7%, 15-year bonds on January 1, 2014. The bond

Question

Slocombe Company sold $6,600,000, 7%, 15-year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on December 31. The bonds were sold at 96.

1.Prepare the journal entry to record the issuance of the bonds on January 1, 2014.(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

2. At December 31, 2014, $17,600 of the bond discount had been amortized. Show the long-term liability balance sheet presentation of the bond liability at December 31, 2014.

3.At January 1, 2016, when the carrying value of the bonds was $6,371,200, the company redeemed the bonds at 104. Record the redemption of the bonds assuming that interest for the year had already been paid. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Explanation / Answer

2)Balance in discount on bond payable account = 264,000 - 17,600 = 246,400

Presentation :

Bond payable             6,600,000

Less:Disocunt on bond payable    (246,400)

Carrying value of bond     6,353,600

3) Discount unamortized at time of redemption = 6,600,000 - 6,371,200 = 228,800

Date Account title Debit credit 1 jan 2014 Cash    [6,600,000*96/100] 6,336,000 Discount on bond payable 264,000 Bond payable 6,600,000 [being issuance of bond recorded]

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