Cupola Fan Corporation issued 10%, $480,000, 10-year bonds for $468,000 on June

Question

Cupola Fan Corporation issued 10%, $480,000, 10-year bonds for $468,000 on June 30, 2018. Debt issue costs were $2,300. 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 $475,000. 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

Date General Journal Debit Credit June 30, 2018 Cash ($468,000 - $2,300) $465,700   Bonds payable $465,700 December 31, 2018 Interest expense $24,715 Bonds payable   {($480,000 - $465,700) / 20} $715 Cash ($480,000 x 10% x1/2) $24,000 June 30, 2019 Interest expense $24,715   Bonds payable {($480,000 - $465,700) / 20} $715   Cash ($480,000 x 10% x1/2) $24,000 July 1, 2019 Bonds payable $467,130 Loss on early extinguishment $7,870   Cash $475,000

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