Elston Company issued $500,000 of eight percent, 20-year bonds at 106 on January 1, 2010. Interest is payable semiannually on July 1 and January 1. Through January 1, 2016, Elston amortized $5,000 of the bond premium. On January 1, 2016, Elston retired the bonds at 103 (after making the interest payment on that date). Prepare the journal entry to record the bond retirement on January 1, 2016.

Logan Company had the following transactions:

Apr. 8: Issued a $5,000, 60-day, six percent note payable in payment of an account with Bennett Company.
May 15: Borrowed $40,000 from Lincoln Bank, signing a 60-day note at nine percent.
Jun 7: Paid Bennett Company the principal and interest due on the April 8 note payable.
Jul. 6: Purchased $12,000 of merchandise from Bolton Company; signed a 90-day note with ten percent interest.
Jul. 14: Paid the May 15 note due Lincoln Bank.
Oct.2: Borrowed $30,000 from Lincoln Bank, signing a 120-day note at 12 percent.
Oct. 4: Defaulted the note payable to Bolton Company.

Required:
a. Record these transactions in general journal form.
b. Record any adjusting entries for interest in general journal form. Logan Company has a December 31 year-end.

Prepare the journal entry to record the bond retirement on January 1, 2016.

total bond premium = $500,000 x 1.06 = $530,000

carrying bond value = $530,000 - $5,000 = $525,000

gain/loss = carrying value - cash paid = $525,000 - $515,000 = $10,000

Keep in mind the carrying value – cash paid to retire bonds = gain or loss on bond retirement

Dr Bonds payable 500,000

Dr Premium on bonds payable 25,000

    Cr Cash 515,000

    Cr Gain on retirement of bonds 10,000

Apr. 8: Issued a $5,000, 60-day, six percent note payable in payment of an account with Bennett Company.

Dr Accounts payable 5,000

    Cr Notes payable 5,000

May 15: Borrowed $40,000 from Lincoln Bank, signing a 60-day note at nine percent.

Dr Cash 40,000

    Cr Notes payable 40,000

Jun 7: Paid Bennett Company the principal and interest due on the April 8 note payable.

Dr Notes payable 5,000

Dr Interest expense 50

    Cr Cash 5,050

Jul. 6: Purchased $12,000 of merchandise from Bolton Company; signed a 90-day note with ten percent interest.

Dr Merchandise inventory 12,000

    Cr Notes payable 12,000

Jul. 14: Paid the May 15 note due Lincoln Bank.

Dr Notes payable 40,000

Dr Interest expense 600

    Cr Cash 40,600

Oct.2: Borrowed $30,000 from Lincoln Bank, signing a 120-day note at 12 percent.

Dr Cash 30,000

    Cr Notes payable 30,000

December 31, adjusting entry

Dr Interest expense 600

    Cr Interest payable 600

Oct. 4: Defaulted the note payable to Bolton Company.

No journal entry required

b

explanation: