question archive On January 1, 2018, the company had issued $1,200,000 par value, 7%, five-year bonds at a price of $1,251,176
On January 1, 2018, the company had issued $1,200,000 par value, 7%, five-year bonds at a price of $1,251,176
Subject:AccountingPrice: Bought3
On January 1, 2018, the company had issued $1,200,000 par value, 7%, five-year bonds at a price of
$1,251,176. Interest was payable semiannually on June 30 and December 31. The market rate of interest
was 6% on the date the bond were issued.
On March 1, 2019, the company extinguished 40% of the bonds outstanding by issuing 15,000 of its
common shares. It also paid in cash all interest due up to March 1, 2019 on these bonds. The market
value of these shares was $36 per share. Assume the company is using IFRS to account for the bonds.
REQUIRED:
a] Prepare the journal entry to record the interest expense on the bonds payable, on December 31, 2018.
b] Prepare the journal entry to record the payment of interest accrued on the bonds which were retired
on March 1, 2019.
c] Prepare the journal entry to record the early retirement of the bonds on March 1, 2019.
Preparing an amortization table for the bond issue for the appropriate period would be useful in solving
this problem.
