Question

Ten years ago, Cary Company issued $1,500,000 of 7 percent, 10-year bonds at a price of 95. On the maturity date of January 2, after making the final interest payment and recording the related entry, Cary retired the bonds.
Required:
Complete the necessary journal entry for January 2, 2019.

Answer 1

Answer:

Debit Bonds Payable for $1,500,000

Credit Cash for $1,500,000.

Explanation:

Although this bonds were issued at a discount, but the Discount on Bonds Payable account will have zero balance on the day of maturity because of the entry that has been made on each interest payment date.

Therefore, the necessary journal entry for January 2, 2019 to complete is as follows:

Debit Bonds Payable for $1,500,000

Credit Cash for $1,500,000

This entry will appear as follows:

Date                  Name of Account               DR ($)               CR ($)      

02 Jan '19         Bond payable                1,500,000

                            Cash                                                       1,500,000

                         (To record retirement of 10-year bonds at maturity.)