Emil Corp. produces and sells wind-energy-driven engines. To finance its operati

Question

Emil Corp. produces and sells wind-energy-driven engines. To finance its operations, Emil Corp. issued $15,000,000 of 20-year, 9% 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:

20Y1 May 1 Issued the bonds for cash at their face amount. Nov. 1 Paid the interest on the bonds. 2022 Nov. 1 Called the bond issue at 96, the rate provided in the bond indenture. (Omit entry for payment of interest.)

Explanation / Answer

Journal entry :

Date account and explanation debit credit May 1 Cash 15000000 Bonds payable 15000000 (To record bond issue) Nov 1, 20Y1 Interest expense (15000000*9%*6/12) 675000 Cash 675000 (To record interest paid) Nov 1, 2022 Bonds payable 15000000 Gain on redemption of bonds 600000 Cash (15000000*96/100) 14400000 (To record bond called)

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