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Answer:
The journal entry is shown below:
Explanation:
According to the scenario, the computation for the given data are as follows:
Cash = face value × 102%
= $118,000 × 102% = $120,360
Loss on bond = $120,360 - $106,554 = $13,806
Discount payable on bonds = $118,000 - $106,554 = $11,446
Interest expense = $118,000 × 9% = $10,620
So, the journal entry for the given data are as follows:
Apr.30 Bonds Payable A/c Dr $118,000
Loss on bonds A/c Dr. $13,806
To Cash A/c $120,360
To Discounts payable A/c $11,446
(Being redemption of bonds at 102 is recorded)
Interest expense A/c Dr $10,620
To bond interest A/c $10,620
( Being bond interest is recorded)
Bond Interest A/c Dr $10,620
To cash A/c $10,620
( Being bond interest payment is recorded)
- The journal entries for the redemption of the bonds are as follows:
But before that the following calculations needs to be done
Cash = face value × 102%
= $118,000 × 102% = $120,360
Now
Loss on bond is
= $120,360 - $106,554
= $13,806
Now
Discount payable on bonds
= $118,000 - $106,554
= $11,446
Now
Interest expense = $118,000 × 9%
= $10,620
Finally, the journal entries are:
On Apr.30
Bonds Payable A/c Dr $118,000
Loss on bonds A/c Dr. $13,806
To Cash A/c $120,360
To Discounts payable A/c $11,446
(Being redemption of bonds at 102 is recorded)
Interest expense A/c Dr $10,620
To bond interest A/c $10,620
( Being bond interest is recorded)
Bond Interest A/c Dr $10,620
To cash A/c $10,620
( Being bond interest payment is recorded)
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