Exercise 14-15 Metlock Company had bonds outstanding with a maturity value of $3

Question

Exercise 14-15 Metlock Company had bonds outstanding with a maturity value of $301,000. On April 30, 2017, when these bonds had an unamortized discount of $9,000, they were called in at 105. To pay for these bonds, Metlock had issued other bonds a month earlier bearing a lower interest rate. The newly issued bonds had a life of 10 years. The new bonds were issued at 101 (face value $301,000). Ignoring interest, compute the gain or loss. Loss on redemption $ Ignoring interest, record this refunding transaction. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit (To record redemption of bonds payable) (To record issuance of new bonds)

Explanation / Answer

1 Price to be paid 316050 =301000*1.05 Less: Carrying amount of bonds 292000 =301000-9000 Loss on redemption 24050 2 Bonds Payable 301000 Loss on Redemption of Bonds 24050       Discount on Bonds Payable 9000       Cash 316050 (To record redemption of bonds payable) 3 Cash 304010 =301000*1.01     Premium on Bonds Payable 3010     Bonds Payable 301000 (To record issuance of new bonds)

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