Question

Lamon Inc. issued $1,000,000, 5-year, 7% bonds on March 1, 2014, when the yield was 6%. Interest is payable semiannually each August 31 and February 28. All of the bonds were sold on March 1, 2014; they mature on February 28, 2019. Lamon’s year-end is December 31.
Requirements
1. Compute the issue (sale) price on March 1, 2014.
2. Record all journal entries for 2014. Lamon used the effective interest method.
3. Record the journal entry for the interest payment on February 28, 2015.
4. Assume on September 1, 2016, Lamon retired 70% of its bonds at 102.75. What is the carrying value of the bonds payable? Calculate the gain or loss on the bond retirement.
5. Record the journal entry for the bond retirement on September 1, 2016.


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  • CreatedJuly 08, 2015
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