Amity Construction Company registered $100,000 of 6% bonds on July 1, 2012. The maturity date of the

Question:

Amity Construction Company registered $100,000 of 6% bonds on July 1, 2012. The maturity date of the bonds is January 1, 2022. Interest is payable January 1 and July 1. The bonds were sold at 105.7 on July 1, 2012. The company uses the straight-line method of amortizing bond premiums and discounts.

Required:

1. Make the required journal entries for each of the following dates:

a. July 1, 2012

b. December 31, 2012

c. January 1, 2013

d. July 1, 2013

2. Because of a substantial increase in the market rate of interest, Amity Construction

Company purchased all the bonds on the open market at face value (100) on July 1,

2015. The following entry had just been made on that day:

Bond Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,700

Premium on Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300

Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000

Made semiannual interest payment on the bonds and amortized bond premium for six months. Prepare the journal entry to record the retirement of the bonds on July 1, 2015.

Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...