Chapter 5 Bonds Payable

Problem 5-1(IAA)

Required 1 Journal Entry

Date Account Debit Credit

2021 1-Apr Cash 7,420,000.00
Bonds Payable 7,000,000.00
Premium on Bonds Payable 420,000.00

1-Oct Interest Expense 420,000.00

Cash 420,000.00

31-Dec Interest Expense 210,000.00

Accrued Interest Payable 210,000.00

31-Dec Premium on Bonds Payable 31,500.00

Interest Expense 31,500.00

2022 1-Jan Accrued Interest Payable 210,000.00

Interest Expense 210,000.00

1-Apr Interest Expense 420,000.00

Cash 420,000.00

1-Oct Interest Expense 420,000.00

Cash 420,000.00

31-Dec Interest Expense 210,000.00

Accrued Interest Payable 210,000.00

31-Dec Premium on Bonds Payable 42,000.00

Interest Expense 42,000.00

Problem 5-2(IAA)
Required 1 Journal Entry
2021 Date Account Debit Credit
1-Jan Unissued Bonds Payable 8,000,000.00
Authorized Bonds Payable 8,000,000.00

1-Jan Cash 4,750,000.00

Discount on Bonds Payable 250,000.00
Unissued Bonds Payable 5,000,000.00
 30-Jun Interest Expense 300,000.00
Cash 300,000.00

31-Dec Interest Expense 300,000.00

Cash 300,000.00

31-Dec Interest Expense 25,000.00

Discount on Bonds Payable 25,000.00

2022 30-Jun Interest Expense 300,000.00

Cash 300,000.00

1-Sep Cash 2,100,000.00

Unissued Bonds Payable 2,000,000.00
Premium on Payable 60,000.00
Interest Expense 40,000.00

31-Dec Interest Expense 420,000.00

Cash 420,000.00

31-Dec Interest Expense 25,000.00

Discount on Bonds Payable 25,000.00

31-Dec Premium on Bonds Payable 2,000.00

Interest Expense 2,000.00

Authorized Bonds Payable 8,000,000.00

Less:Unissued Bonds Payable 1,000,000.00
Total 7,000,000.00
Less:Discount Bonds Payable 200,000.00
Total 6,800,000.00
Add:Premium on Bonds Payable 58,000.00
Carrying Amount of Bonds Payable 6,858,000.00

Problem 5-3(IAA)
Required 1 Journal Entry
Date Account Debit Credit
1-Apr Cash 4,850,000.00
Discount on Bonds Payable 100,000.00
Bond Issue cost 50,000.00
Bonds Payable 5,000,000.00

1-Oct Interest Expense 300,000.00

 Cash 300,000.00

31-Dec Interest Expense 150,000.00

Accrued Interest Payable 150,000.00

31-Dec Interest Expense 22,500.00

Discount on Bonds Payable 15,000.00
Bonds issue cost 7,500.00

1-Jan Accrued Interest Payable 150,000.00

Interest Expense 150,000.00

1-Apr Interest Expense 300,000.00

Cash 300,000.00

1-Jul Interest Expense 15,000.00

Discount on Bonds Payable 10,000.00
Bonds issue cost 5,000.00

1-Jul Bonds Payable 2,000,000.00

Interest Expense 60,000.00
Loss on retirement of bonds payable 25,000.00
Discount on Bonds Payable 30,000.00
Bonds issue cost 15,000.00
Cash 2,040,000.00

1-Oct Interest Expense 180,000.00

Cash 180,000.00

31-Dec Interest Expense 90,000.00

Accrued Interest Payable 90,000.00

31-Dec Interest Expense 7,500.00

Discount on Bonds Payable 5,000.00
Bonds issue cost 2,500.00

Required 2 Bonds Payable 3,000,000.00

Less:Discount Bonds Payable 40,000.00
Bonds issue cost 20,000.00
Carrying Amount of Bonds Payable 2,940,000.00
Required 2 Present Bonds payable on Fianancial Statement

Bonds Payable 7,000,000.00

Premium on Bonds Payable 346,500.00
Carrying on Bonds Payable 7,346,500.00
step 1 Amortization of discount /premum/boc
step 2 Compute balance of discount/premium
step 3 compute accrued interest
step 4 compute total cash payment
step 5 compute carrying amount
step 6 compute gain/loss of retirement of b ond
step 7 record the retirement of the bond
Bonds Payable 5,000,000.00
Less:Dicount on bonds payable 85,000.00
Bonds issue cost 42,500.00
Carrying on Bonds Payable 4,872,500.00

Discount on bonds payable 2000000/5000000*75000 30,000.00

Bonds issue cost 2000000/5000000*37500 15,000.00
Accrued interest 600000*3/12*2/5 60,000.00

Retirement price 1,980,000.00

Add:Accrued interest 60,000.00
Total Cash Payment 2,040,000.00

Bonds payable retired 2,000,000.00

Discount on bonds payable 30,000.00
Bonds issue cost 15,000.00
Carrying on Bonds Payable 1,955,000.00

Retirement price 1,980,000.00

Less:Carrying amount of bonds payable 1,955,000.00
Gain/Loss on early retirement of bonds 25,000.00