Homework SourseSwisher Company issued 2000000 of bonds on January 1 2014 In
Swisher Company issued $2,000,000 of bonds on January 1, 2014.
Instructions
(a) Prepare the journal entry to record the issuance of the bonds if they are issued at (1) 100,
(2) 98, and (3) 103.
(b) Prepare the journal entry to record the redemption of the bonds at maturity, assuming
the bonds were issued at 100.
(c) Prepare the journal entry to record the redemption of the bonds before maturity at 98.
Assume the balance in Premium on Bonds Payable is $9,000.
(d) Prepare the journal entry to record the conversion of the bonds into 60,000 shares of
$10 par value common stock. Assume the bonds were issued at par.
Solution
SOLUTION
| S.No. | Account titles and Explanation | Debit ($) | Credit ($) |
| A1. | Cash | 2,000,000 | |
| Bonds payable | 2,000,000 | ||
| (Being bonds issued at face value recorded) | |||
| A2. | Cash | 1,960,000 | |
| Discount on bonds payable ($2,000,000*2%) | 40,000 | ||
| Bonds payable | 2,000,000 | ||
| (Being bonds issued at discount recorded) | |||
| A3. | Cash | 2,060,000 | |
| Bonds payable | 2,000,000 | ||
| Premium on bonds payable ($2,000,000*3%) | 60,000 | ||
| (Being bonds issued at premium recorded) | |||
| B. | Bonds payable | 2,000,000 | |
| Cash | 2,000,000 | ||
| (Being bonds retiremenr recorded) | |||
| C. | Bonds payable | 2,000,000 | |
| Premium on bonds payable | 9,000 | ||
| Cash ($2,000,000*98%) | 1,960,000 | ||
| Gain on redemption of bonds | 49,000 | ||
| (Being retirement of bonds before maturity recorded) | |||
| D. | Bonds payable | 2,000,000 | |
| Common stock (60,000shares *$10) | 600,000 | ||
| Paid in capital in excess of par | 1,400,000 | ||
| (Being conversion of bonds into common stock recorded) |
