CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 12-3 Bonds Payable Transactions.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

LESSON 12-3LESSON 12-3

Bonds Payable Transactions

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LESSON 12-3CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

ISSUING BONDSISSUING BONDS page 356

1. Record the issuance of the bonds.

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LESSON 12-3CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

Balance Owed on Bond Issue

Bond Interest Rate

=AnnualInterest×

$250,000.00 12% = $30,000.00×

2. Record the payment of the interest.

1. Calculate the annual interest.

PAYING INTEREST ON BONDSPAYING INTEREST ON BONDS page 356

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LESSON 12-3CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

1. Record the initial payment to the bond sinking fund.

DEPOSITING CASH IN A DEPOSITING CASH IN A BOND SINKING FUNDBOND SINKING FUND page 357

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LESSON 12-3CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

Amount of Increase in Sinking Fund

Interest Earned During Year

=Amount to be

Deposited–

$50,000.00 $2,000.00 = $48,000.00–

2. Record the payment to the bond sinking fund.

1. Calculate the amount to be deposited in the fund.

DEPOSITING CASH TO SINKING FUND DEPOSITING CASH TO SINKING FUND AND RECORDING INCOME EARNEDAND RECORDING INCOME EARNED page 357

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LESSON 12-3CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

July 1, 20X4. Received notice from bond trustee that bond issue was retired using bond sinking fund, $250,000.00. Memorandum No. 600.

Bonds Payable

Retired 250,000.00 Balance 250,000.00(New Bal. zero)

Bonds Sinking Fund

Balance 250,000.00(New Bal. zero)

Retired 250,000.00

RETIRING A BOND ISSUERETIRING A BOND ISSUE page 358

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LESSON 12-3CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

TERMS REVIEWTERMS REVIEW

bond bond issue trustee bond sinking fund retiring a bond issue term bonds serial bonds

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