Bonds payable issued between interest dates - early retirement
Deegan Imports received authorization on 31 December, Year 1, to issue $4,500,000 face value of 8%, 20-year bonds. The interest payment dates are 30 June and 31 December. All the bonds were issued at par, plus accrued interest on 1 February, Year 2. The bonds are callable by Deegan at any time at 105.
(a) Prepare the journal entry to record the issuance of the bonds on 1 February, Year 2.
(b) Prepare the journal to record the first interest payment on the bonds at 30 June, Year 2
(c) What is the amount of bond interest expense reported in Deegan Imports' Year 2 income statement relating to these bonds? $___________
(d) What is the amount of bond interest payable appearing in Deegan Imports' statement of financial position at 31 December, Year 2, with respect to these bonds? $____________
(e) Deegan exercises the call provision and retires one-third of the bond issue on 1 July, Year 3.
Prepare the journal entry to record this transaction on 1 July, Year 3.
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