Question

AP Swisher Company issued $2,000,000 of bonds on January 1, 2022. Instructions a. Preparethejournalentrytorecordtheissuanceofthebondsiftheyareissuedat(1)100,(2)98,and (3) 103. b. Prepare the journal entry to record the redemption of the bonds at maturity, assuming the bonds were issued at 100. c. Prepare the journal entry to record the redemption of the bonds before maturity at 98. Assume the balance in Premium on Bonds Payable is $9,000.

Answer 1

The journal entry to record the issuance of the bonds at different prices is as follows: If the bonds are issued at 100, the journal entry would be Cash $2,000,000; Bonds Payable $2,000,000. If the bonds are issued at 98, the journal entry would be Cash $1,960,000; Premium on Bonds Payable $40,000; Bonds Payable $2,000,000. If the bonds are issued at 103, the journal entry would be Cash $2,060,000; Discount on Bonds Payable $60,000; Bonds Payable $2,000,000.

Step-by-step explanation:

a. The journal entry to record the issuance of the bonds at different prices would be as follows:

• (1) If the bonds are issued at 100, the journal entry would be:
• Cash $2,000,000
• Bonds Payable $2,000,000
• (2) If the bonds are issued at 98, the journal entry would be:
• Cash $1,960,000
• Premium on Bonds Payable $40,000
• Bonds Payable $2,000,000
• (3) If the bonds are issued at 103, the journal entry would be:
• Cash $2,060,000
• Discount on Bonds Payable $60,000
• Bonds Payable $2,000,000

b. The journal entry to record the redemption of the bonds at maturity, assuming the bonds were issued at 100, would be:

• Bonds Payable $2,000,000
• Cash $2,000,000

c. The journal entry to record the redemption of the bonds before maturity at 98, assuming the balance in Premium on Bonds Payable is $9,000, would be:

• Bonds Payable $2,000,000
• Premium on Bonds Payable $9,000
• Cash $1,991,000