Question

Blossom Company issued $394,000 of 8%, 10-year bonds on January 1, 2022, at face value. Interest is payable annually on January 1, 2023.

Prepare the journal entry to record the redemption of bonds at maturity, assuming interest for the last interest period has been paid and recorded.

Answer 1

The journal entry to record the redemption of Blossom Company's 8%, $394,000 bonds at maturity is a debit to Bonds Payable for $394,000 and a credit to Cash for $394,000, reflecting the payment of the principal to bondholders.

Step-by-step explanation:

The question involves preparing a journal entry for the redemption of bonds at maturity by Blossom Company. After 10 years of issuing an 8%, $394,000 face value bond, the company would need to make a final payment at maturity, assuming all interest payments have been made annually. The journal entry would involve a debit to the Bonds Payable account to remove the liability from the books and a credit to Cash to reflect the payment of cash to bondholders.

Journal Entry for Redemption of Bonds at Maturity:

• Debit Bonds Payable for $394,000
• Credit Cash for $394,000

This transaction effectively extinguishes the bond liability as the principal amount is paid back to the bondholders.