Answer:
April 1 2016
No Entry
July 1, 2017
Dr Cash $906,000
Dr Discount on bonds payable $94,000
Cr Bonds payable $1,000,000
Sep 30 2017
Dr Interest Expense $23,917
Cr Discount on bonds payable $3,917
Cr Cash $20,000
Dec 31,2017
Dr Interest Expense $23,917
Cr Discount on bonds payable $3,917
Cr Interest payable $20,000
October 1 2019
Dr Bonds payable $1,000,000
Dr Loss on early extinguishment of bonds $208,750
Cr Discount on bonds payable $58,750
Cr Cash $1,150,000
Explanation:
Preparation of the journal entries related to the bonds that the corporation entered into its records during the period April 1, 2016 through December 31, 2017
April 1 2016
No Entry
July 1, 2017
Dr Cash $906,000
Dr Discount on bonds payable $94,000
($1,000,000-$906,000)
Cr Bonds payable $1,000,000
(Being to record issue bond for cash $906,000 and discount on bonds)
Sep 30 2017
Dr Interest Expense $23,917
[(1,000,000*8%*3/12)+($94,000/72months*3)]
(=$20,000+$3,917)
Cr Discount on bonds payable $3,917
($94,000/72months*3)
Cr Cash $20,000
(1,000,000*8%*3/12)
(Being to record interest paid and discount amortized)
Dec 31,2017
Dr Interest Expense $23,917
[(1,000,000*8%*3/12)+($94,000/72months*3)]
(=$20,000+$3,917)
Cr Discount on bonds payable $3,917
($94,000/72months*3)
Cr Interest payable $20,000
(1,000,000*8%*3/12)
(Being to record interest accrued and discount amortized)
Preparation of the journal entry that was recorded when the bonds were redeemed in October 2019
October 1 2019
Dr Bonds payable $1,000,000
Dr Loss on early extinguishment of bonds $208,750
($1,150,000+$58,750-$1,000,000)
Cr Discount on bonds payable $58,750
[$94,000-($94,000/72)*27]
($94,000-$35,250=$58,750)
Cr Cash $1,150,000
(Being to record Redemption of bonds and discount Amortized)
