Reference no: EM132692406
Problem - The fiscal year of Russell Inc., a manufacturer of acoustical supplies, ends December 31. Selected transactions for the period 20Y1 through 20Y8, involving bonds payable issued by Russell Inc., are as follows:
20Y1
June 30. Issued $2,000,000 of 25-year, 7% callable bonds dated June 30, 20Y1, for cash of $1,920,000. Interest is payable semiannually on June 30 and December 31.
Dec. 31. Paid the semiannual interest on the bonds. The bond discount is amortized annually in a separate journal entry.
Dec. 31. Recorded straight-line amortization of $1,600 of discount on the bonds.
20Y2
June 30. Paid the semiannual interest on the bonds. The bond discount is amortized annually in a separate journal entry.
Dec. 31. Paid the semiannual interest on the bonds. The bond discount is amortized annually in a separate journal entry.
Dec. 31. Recorded straight-line amortization of $3,200 of discount on the bonds.
20Y8
June 30. Recorded the redemption of the bonds, which were called at 101.5. The balance in the bond discount account is $57,600 after the payment of interest and amortization of dis-count have been recorded. Record the redemption only.
Instructions -
1. Journalize entries to record the preceding transactions.
2. Determine the amount of interest expense for 20Y1 and 20Y2.
3. Determine the carrying amount of the bonds as of December 31, 20Y2.
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