Vidovich Corp. produces and sells renewable energy equipment. To finance its ope

Question

Vidovich Corp. produces and sells renewable energy equipment. To finance its operations, Vidovich Corp. issued $1,249,000 of 10-year, 13% callable bonds on January 1, 2014, with interest payable on January 1 and July 1. The fiscal year of the company is the calendar year.

Journalize the entries to record the following selected transactions:

2014 Jan. 1 Issued the bonds for cash at their face amount. July 1 Paid the interest on the bonds. 2020 July 1 Called the bond issue at 95, the rate provided in the bond indenture. (Omit entry for payment of interest.)

Explanation / Answer

Jan 1 2014:
DR Cash 1,249,000
CR Bonds Payable 1,249,000

Jul 1, 2020
DR Interest Expense 81,185 ($1,249,000 x .013x .50)
CR Cash 81,185

Jul 1, 2020
DR Bonds Payable 1,249,000
CR Cash 1,18,655
CR Gain on Redemption of Bonds 62,450

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