On January 1, Innovative Solutions, Inc. issued $280,000 in bonds at face value.
ID: 2593897 • Letter: O
Question
On January 1, Innovative Solutions, Inc. issued $280,000 in bonds at face value. The bonds have a stated interest rate of 5 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 103. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
1. Record the issuance of bonds of $280,000 at face value.
2. Record the interest payment on December 31.
3. Record the retirement of the bonds at a quoted price of 103.
Explanation / Answer
Requirement Account Title Debit Credit 1 Cash $280,000 Bond Payable $280,000 2 Interest Expense $14,000 Cash ($280,000 x 5% x 1) $14,000 3 Bonds Payable $280,000 Loss on Bonds Retired $8,400 Cash ($280,000 x 103%) $288,400