On December 31 of the current fiscal year, Palus Inc. issued a $500,000 of 10-year 11% bonds. The bonds were dated December 31 of the same year. Interest on the bonds is payable on June 30 and December 31 of each year.
Record the following transactions.
1) The bonds were sold for $531,161 on December 31 of the current year. The market rate of interest on this date was 10%.
2) Interest was paid on June 30, and the related amount of bond premium was amoritized, based on the straight-line method.
3) Interest was paid of December 31, and the related amount of bond premium was amortized based on the straight-line method.
4) On December 31, (bonds are one year old) one half of the bonds were redeemed at 103.
On December 31 of the current fiscal year, Palus Inc. issued a $500,000 of 10-year 11% bonds. The bonds were dated December 31 of the same year. Interest on the bonds is payable on June 30 and December 31 of each year.
Record the following transactions.
1) The bonds were sold for $531,161 on December 31 of the current year. The market rate of interest on this date was 10%.
2) Interest was paid on June 30, and the related amount of bond premium was amoritized, based on the straight-line method.
3) Interest was paid of December 31, and the related amount of bond premium was amortized based on the straight-line method.
4) On December 31, (bonds are one year old) one half of the bonds were redeemed at 103.
Related questions
Entries for Bonds Payable, including bond redemption
The following transactions were completed by Montague Inc., whose fiscal year is the calendar year:
| Year 1 | |
| July 1. | Issued $55,000,000 of 10-year, 9% callable bonds dated July 1, Year 1, at a market (effective) rate of 7%, receiving cash of $62,817,040. Interest is payable semiannually on December 31 and June 30. |
| Dec. 31. | Paid the semiannual interest on the bonds. The bond discount amortization of $390,852 is combined with the semiannual interest payment. |
| 31. | Closed the interest expense account. |
| Year 2 | |
| June 30. | Paid the semiannual interest on the bonds. The bond discount amortization of $390,852 is combined with the semiannual interest payment.. |
| Dec. 31. | Paid the semiannual interest on the bonds. The bond discount amortization of $390,852 is combined with the semiannual interest payment. |
| 31. | Closed the interest expense account. |
| Year 3 | |
| June 30. | Recorded the redemption of the bonds, which were called at 103. The balance in the bond premium account is $6,253,632 after payment of interest and amortization of premium have been recorded. (Record the redemption only.) |
1. Journalize the entries to record the foregoing transactions. For a compound transaction, if an amount box does not require an entry, leave it blank. When required, round amounts to the nearest dollar.
| Year 1 July1 | |||
| Dec.31 | |||
| Dec.31 | |||
| Year 2 June 30 | |||
| Dec.31 | |||
| Dec.31 | |||
| Year 3 June 30 | |||
2. Indicate the amount of the interest expense in (A) Year 1 and (B) Year 2.
| a. Year 1 | $ |
| b. Year 2 | $ |
3. Determine the carrying amount of the bonds as of December 31, Year 2.
