Required: Prepare the necessary journal entries to record the following transactions relating to the long-term issuance of bonds payable of Pynchon Apparel:
March 1, 2014
Pynchon issued $400,000 face value, 8% bonds, dated December 1, 2013, for $437,000, including accrued interest which is recorded as interest expense on 3/1/2014. In addition, bond issue costs amounted to $2,900, which are not included in the $437,000. Interest is payable semiannually on December 1 and June 1 with the bonds maturing 10 years from the past December 1, 2013. Straight-line amortization is used for any bond premium and bond issue cost amortization. Bond issue costs are only amortized on December 31 of each year. The bonds are callable at 102.
December 1, 2014
Paid the semiannual interest on Pynchon Apparel bonds and amortized the bond issue costs Pynchon subsequently purchased $200,000 face value bonds at the call price.
Interest Payment - Record for all $400,000 of the Bonds Payable
Amortization of Bond Issue Costs - Record for all $400,000 of the Bonds Payable
Purchase of $200,000 Callable Bonds Payable