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DISTAFF & SPEAR, Inc
DISTAFF & SPEAR, Inc., issued $250,000 of 8%, 15-year bonds at 104 on July 1, 2007. Interest is payable semi-annually on December 31 and June 30. Through June 30, 2014 DISTAFF & SPEAR amortized $3,186 of the bond premium. On July 1, 2014 DISTAFF & SPEAR retired the bonds at 99.
(a)
Prepare journal entries to record the (i) issue (3 marks) and (ii) retirement of these bonds. (Assume the June interest expense has already been recorded.) (7 marks)
Expert Solution
| Journal Entries: | |||
| Date | Account Titles | Debit | Credit |
| July, 1 2007 | Cash (250,000*104/100) | 260000 | |
| Premium on Bonds Payable | 10000 | ||
| 8% Bonds Payable | 250000 | ||
| (Being entry made to record the issue of bonds) | |||
| July, 1 2014 | 8% Bonds Payable | 250000 | |
| Unamortized Premium on Bonds (10,000-3,186) | 6814 | ||
| Profit on Redemption of Bonds | 9314 | ||
| Cash (250,000*99/100) | 247500 | ||
| (Being entry made to record the retirement of bonds) | |||
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