Question

Gresham Ltd. issued $100,000 face value bonds on January 1, 20X7 which will mature on December 31, 20X11. Gresham has a December 31 fiscal year end. The bonds have a coupon rate of 6% per annum, interest payable on January 1, and were priced to yield 4% at issue date. On April 1, 20X8, Gresham repurchased $20,000 face value of those bonds at 95 as it had idle funds and wished to improve their debt-to-equity ratio. Any accrued interest owing was paid at the time of repurchase. Required: Provide journal entries required by Gresham to record the issuance of the bonds, the entry required on December 31, 20X7 and on April 1, 20X8.