Entries for Issuing and Calling Bonds; Gain Fogel Corp. produces and sells renew

Question

Entries for Issuing and Calling Bonds; Gain

Fogel Corp. produces and sells renewable energy equipment. To finance its operations, Fogel Corp. issued $32,000,000 of 20-year, 11% callable bonds on January 1, 2012, 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:
2012
Jan1 Issued the bonds for cash at their face amount
July 1. Paid the interest on the bonds
2018
July 1 Called the bond issue at 97, the rate provided in the bond indenture.(Omit entry for payment of interest).

Journalize
Issued the bonds for cash at their face amount

Journalize
Paid the interest on the bonds

Journalize
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 or enter "0".

Explanation / Answer

Journalize Issued the bonds for cash at their face amount Debit: Cash 32,000,000 Credit: Bonds payable 32,000,000 Journalize Paid the interest on the bonds Interest paid = 32,000,000*.11*.5 = 1,760,000 Debit: Interest expense 1,760,000 Credit: Cash 1,760,000 Journalize 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 or enter "0". Called at 97: 32,000,000*.97 = 31,040,000 Debit: Bonds Payable 32,000,000 Credit: Cash 31,040,000 Credit: Gain on retirement of bonds 960,000

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