# On January 1, 2017, Kittle Corporation issued five-year, 4% bonds payable with a face value of \$2,500,000. The bonds were

## Question:

On January 1, 2017, Kittle Corporation issued five-year, 4% bonds payable with a face value of \$2,500,000. The bonds were issued at 95 and pay interest on January 1 and July 1. Kittle amortizes bond discounts using the straight-line method. On December 31, 2019, Kittle retired the bonds early by purchasing them at a market price of 97. The company’s fiscal year ends on December 31.

Requirements

1. Journalize the issuance of the bonds on January 1, 2017.

2. Record the semiannual interest payment and amortization of bond discount on July 1, 2017.

3. Record the interest accrual and discount amortization on December 31, 2017.

4. Calculate the carrying value of the bonds payable on December 31, 2019, prior to their retirement.

5. Calculate the gain or loss on the retirement of the bonds payable on December 31, 2019. Indicate where this gain or loss will appear in the financial statements.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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...

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Related Book For

## Financial Accounting

ISBN: 978-0134725987

12th edition

Authors: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.

Question Details
Chapter # 9- Long-Term Liabilities
Section: Short Exercises
Problem: 19
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