Mellilo Corporation issued $6,000,000 of 20-year, 9.5 percent bonds on July 1, 2
ID: 2481162 • Letter: M
Question
Mellilo Corporation issued $6,000,000 of 20-year, 9.5 percent bonds on July 1, 2015, at 98. Interest is due on June 30 and December 31 of each year, and all of the bonds in the issue mature on June 30, 2035. Mellilo's fiscal year ends on December 31. Record the issuance of the bonds and entries to be passed post the issue.
-Record the issuance of bonds.
-Record the payment of interest and amortize bond discount
-Record the final interest payment and amortize bond discount.
-Record the retirement of bonds at maturity.
Explanation / Answer
Accounts Debit$ Credit $ 1 -Record the issuance of bonds. 01.07.15 Cash 5880000 Discount on bond payable 120000 Bonds Payable 6000000 (9.5% Bonds issued at discount price $98) 2 Record the payment of interest and amortize bond discount 30.12.15 Interst Expenses 285000 cash 285000 ( being half yearly 9.5 %interst paid ) 30.12.15 Interst Expenses 3000 Discount on bond payable 3000 ( Amortixation of Discount on bond payable over the life of bond ( $120000/20 years= $6000 per year and $3000 half yearly) 3 Record the final interest payment and amortize bond discount. 30.6.2035 Interst Expenses 285000 cash 285000 ( being half yearly 9.5 %interst paid ) 30.6.2035 Interst Expenses 3000 Discount on bond payable 3000 ( Amortixation of Discount on bond payable ) 4 Record the retirement of bonds at maturity. 30.06.2035 Bonds Payable 6000000 cash 6000000 ( Being redumption of Bond)