Medallion Co. sold $800,000, 9%, 10 year bonds on January 1, 2015. The bonds pay
ID: 2531155 • Letter: M
Question
Medallion Co. sold $800,000, 9%, 10 year bonds on January 1, 2015. The bonds pay interest on January 1. The bonds were sold at 105. On January 1, 2017, when the carrying value of the bonds was $832,000, The company redeemed the bonds at 106. Step1.) Prepare the journal entry to record the issuance of the bonds on January 1, 2015. Step2.) Prepare the journal entry required at December 31, 2015. Step3.) Prepare the journal entry required at January 1, 2016. Step4.) Record the redemption of the bonds assuming that interest for the period has already been paid.Explanation / Answer
Journal entry :
Date accounts & explanation debit credit Jan 1,2015 Cash (800000*1.05) 840000 Bonds payable 800000 Premium on bonds payable 40000 (To record bond issue) Dec 31,2015 Interest expense 68000 Premium on bonds payable 4000 Interest payable (800000*9%) 72000 (To record interest) Jan 1,2016 Interest payable 72000 Cash 72000 (To record interest paid) Jan 1,2017 Bonds payable 800000 Premium on bonds payable 32000 Loss on redemption of bonds 16000 Cash 848000 (To record redemption of bonds)