. On June 1, 2008, Logsdon Corp. issued $1,500,000, 8%, 5-year bonds at face value. The bonds were dated June 1, 2008, and pay interest semiannually on June 1 and December 1. Financial statements are prepared annually on December 31.
Instructions
a) Prepare the journal entry to record the issuance of the bonds.
b) Prepare the adjusting entry to record the accrual of interest on December 31, 2008.
c) Show the balance sheet presentation on December 41, 2008.
d) Prepare the journal entry to record payment of interest on June 1, 2009, assuming no accrual of interest from January 1, 2009, to June 1, 2009.
e) Prepare the journal entry to record payment of interest on December 1, 2009.
f) Assume that on December 1, 2009, Logsdon calls the bonds at 102. Record the redemption of the bonds.
(a) 2008
June 1 Cash …………………………………………… 1,500,000
Bonds Payable………………………………………….. 1,500,000
(b) Dec. 31 Bond Interest Expense ………………… 10,000
Bond Interest Payable …………………… 10,000
($1,500,000 X 8% X 1/12)
(c) Current Liabilities:
Bond Interest Payable …………………………. 10,000
Long-term Liabilities:
Bonds Payable ……………………………………. 1,500,000
- 2009
June 1 Bond Interest Payable …………………. 10,000
Bond Interest Expense ………………… 50,000
($1,500,000 X 8% X 5/12)
Cash ……………………………………. 60,000
(e) Dec. 1 Bond Interest Expense ………………… 60,000
Cash ……………………………………. 60,000
($1,500,000 X 8% X 1/2)
(f) Dec. 1 Bonds Payable ……………………………. 1,500,000
Loss on Bond Redemption ……………….. 30,000
Cash ($1,500,000 X 1.02) ……………. 1,530,000
