On January 1, Innovative Solutions, Inc. issued $300,000 in bonds at face value.

Question

On January 1, Innovative Solutions, Inc. issued $300,000 in bonds at face value. The bonds have a stated interest rate of 7 percent. The bonds mature in 10 years and pay interest once per year on December 31 Required: 1,2&3. Complete the required journal entries to record the bond issuance, interest payment on December 31, early retirement of the bonds. Assume the bonds were retired immediately after the first interest payment at a quoted price of 102 (If no entry is required for a transactionevent, select No Journial Entry Required"in the fist account field View transaction list Journal entry worksheet 2 3 Record the issuance of bonds of $300,000 at face value. Note: Ent Debit 01

Explanation / Answer

Journal entry :

Date account & explanation debit credit Jan 1 Cash 300000     Bonds payable 300000 (To record bond issue) Dec 31 Interest expense (300000*7%) 21000     Cash 21000 (TO record interest paid) Dec 31 Bonds payable 300000 Loss on early retirement of bonds 6000     Cash (300000*1.02) 306000 (TO record early retirement)

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