Analyzing Financial Statement Effects of Bond Redemption Dechow, Inc., issued $750,000 of 8%, 15-year bonds at 96 on July 1, 2009. Interest is payable semiannually on December 31 and June 30. Through June 30, 2016, Dechow amortized $9,558 of the bond discount. On July 1, 2016, Dechow retired the bonds at 101. Required a. Prepare journal entries to record the issue and retirement of these bonds. (Assume the June interest expense has already been recorded.)

Dechow, Inc.

Journal Entries:

July 1, 2009: DebitCash $720,000

Debit Bonds Discount $30,000

Credit 8% Bonds Payable $750,000

To record the issuance of a 15-year bonds at 96 with semiannual interest payments.

July 1, 2016 Debit Bonds Payable $750,000

Debit Bonds Retirement Loss $27,942

Credit Unamortized discount $20,442

Credit Cash $757,500

To record the retirement of the bonds at 101.

Explanation:

a) Data and Analysis:

July 1, 2009: Cash $720,000 Bonds Discount $30,000 8% Bonds Payable $750,000 15-year bonds at 96 on July 1, 2009 with semiannual interest payments.

July 1, 2016 Bonds Payable $750,000 Bonds Retirement Loss $27,942 Unamortized discount $20,442 Cash $757,500 retired the bonds at 101.

Unamortized discount:

Discount on the bonds =        $30,000 ($750,000 - $720,000)

Amortized bonds discount        (9,558)

Unamortized bonds discount $20,442

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