Please answer all four requirements in details. Thank you! Cupola Fan Corporatio
ID: 2543908 • Letter: P
Question
Please answer all four requirements in details. Thank you!
Cupola Fan Corporation issued 8%, $440,000, 10-year bonds for $421,000 on June 30, 2018, Debt issue costs were $1,900. Interest is paid semiannually on December 31 and June 30. One year from the issue date (July 1, 2019), the corporation exercised its call privilege and retired the bonds for $425,000. The corporation uses the straight-line method both to determine interest expense and to amortize debt issue costs. Required: 1. to 4. Prepare the journal entry to record the issuance of the bonds, the payment of interest and amortization of debt issue costs on December 31, 2018 & 2019, and the call of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)Explanation / Answer
Discount on issue of Bond a/c Dr19000
To 8% Bond A/c440000
To bank a/c1900
2. on 31St Dec. 2018 i.e. at the Time of payment of interest
Interest Expense a/c (440000*8%*4/12) Dr 17600
To Bank A/c 17600
3. . on 30th June 2019. i.e. at the Time of payment of interest
Interest Expense a/c (440000*8%*4/12) Dr 17600
To Bank A/c 17600
4 on 1St July 2019 i.e. at the Time of payment of interest
8% Bond A/c Dr 440000
To Bank A/c 425000
To Discount on issue of Bond a/c 21000
Note 1 interest Expenses on 31St Dec and 30th June will be Transferred to Statement of Profit and Loss
Note 2. Discount On issue of Bond and issue expense will be written off in 10 years but as the bond is repaid so full amount will be Transferred to Statement of Profit and Loss
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