Homework SourseEntries for Issuing and Calling Bonds Gain Emil Corp produce
Entries for Issuing and Calling Bonds; Gain
Emil Corp. produces and sells wind-energy-driven engines. To finance its operations, Emil Corp. issued $1,663,000 of 25-year, 10% callable bonds on May 1, 20Y1, at their face amount, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year.
Journalize the entries to record the following selected transactions:
Issued the bonds for cash at their face amount.
Paid the interest on the bonds.
Called the bond issue at 97, the rate provided in the bond indenture. (Omit entry for payment of interest.) For a compound transaction, if an amount box does not require an entry, leave it blank.
| 20Y1 | |
| May 1 | Issued the bonds for cash at their face amount. |
| Nov. 1 | Paid the interest on the bonds. |
| 20Y5 | |
| Nov. 1 | Called the bond issue at 97, the rate provided in the bond indenture. (Omit entry for payment of interest.) |
Solution
Solution:
| Journal Entries - Emil Corp. | |||
| Date | Particulars | Debit | Credit |
| 1-May-20Y1 | Cash Dr | $1,663,000.00 | |
| To Bond Payable | $1,663,000.00 | ||
| (To record issue of bond) | |||
| 1-Nov-20Y1 | Interest Expense Dr | $83,150.00 | |
| To Cash | $83,150.00 | ||
| (To record payment of interest) | |||
| 1-Nov-20Y5 | Bond Payable Dr | $1,663,000.00 | |
| To Cash | $1,613,110.00 | ||
| To Gain on retirement of bonds | $49,890.00 | ||
| (To record early retirement of callable bonds) |
