On January 1, 2017, Kittle Corporation issued five-year, 4% bonds payable with a face value of $2,500,000.
Question:
On January 1, 2017, Kittle Corporation issued five-year, 4% bonds payable with a face value of $2,500,000. The bonds were issued at 95 and pay interest on January 1 and July 1. Kittle amortizes bond discounts using the straight-line method. On December 31, 2019, Kittle retired the bonds early by purchasing them at a market price of 97. The company’s fiscal year ends on December 31.
Requirements
1. Journalize the issuance of the bonds on January 1, 2017.
2. Record the semiannual interest payment and amortization of bond discount on July 1, 2017.
3. Record the interest accrual and discount amortization on December 31, 2017.
4. Calculate the carrying value of the bonds payable on December 31, 2019, prior to their retirement.
5. Calculate the gain or loss on the retirement of the bonds payable on December 31, 2019. Indicate where this gain or loss will appear in the financial statements.
CorporationA Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...
Step by Step Answer:
Req 1 Journal DATE ACCOUNT TITLES AND EXPLANATION DEBIT CREDIT 2017 Jan 1 Cash 2500000 95 ...View the full answer
Financial Accounting
ISBN: 978-0134725987
12th edition
Authors: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.
