On October 1, 2019, Rupert Limited sold a 4% six-year, $20 million bond at 94.92, providing a yield of 5% annually. Interest is paid annually on September 30. On January 1, 2022, Dunbar retired all the bonds at 101. The company’s year-end is December 31. Required: 1. Prepare the journal entry to record the issuance of the bond on October 1, 2019. 2. Prepare the journal entry to record interest expense on December 31, 2019, the payment of interest on September 30, 2020 and the interest expense on December 31, 2020, assuming the company uses the effective interest method in amortizing any discounts or premiums. 3. Determine the interest expense for 2021. 4. Prepare the journal entry to record the retirement of the bond on January 1, 2022.

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable
Section: Chapter Questions
Problem 16E
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On October 1, 2019, Rupert Limited sold a 4% six-year, $20 million bond at 94.92, providing a yield of 5% annually. Interest is paid annually on September 30. On January 1, 2022, Dunbar retired all the bonds at 101. The company’s year-end is December 31. Required:

1. Prepare the journal entry to record the issuance of the bond on October 1, 2019.

2. Prepare the journal entry to record interest expense on December 31, 2019, the payment of interest on September 30, 2020 and the interest expense on December 31, 2020, assuming the company uses the effective interest method in amortizing any discounts or premiums.

3. Determine the interest expense for 2021.

4. Prepare the journal entry to record the retirement of the bond on January 1, 2022.

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