On January 1, Innovative Solutions, Inc. issued $270,000 in bonds at face value.

Question

On January 1, Innovative Solutions, Inc. issued $270,000 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 & Complete the required journal entries to record the bond issuance, 3 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. (f no entry is required for a transaction event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet Record the issuance of bonds of $270,000 at face value. Note: Enter debits before credits General Journal Date Jan Record entry View general journal Clear entry

Explanation / Answer

Journal entry :

Date accounts & explanation debit credit Jan 1 Cash 270000 Bonds payable 270000 (To record issuance of bonds payable) Dec 31 Interest expense (270000*7%) 18900 Cash 18900 (To record interest paid) Dec 31 Bonds payable 270000 Loss on redemption of bonds 5400 Cash (270000*1.02) 275400 (To record redemption of bonds)

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