Entries for Issuing and Calling Bonds; Gain Emil Corp, p oduces and sells wind e

Question

Entries for Issuing and Calling Bonds; Gain Emil Corp, p oduces and sells wind energy- rt en engines. To finance its operations, Emil Corp. issued $363 000 of 10 year, 12% callable bonds on May 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 Pald the Interest on the bonds. 20YS Nov. 1 Called the bond issue at 96, the rate provided in the bond indenture. 20Y1, at their face a mount. w n est abie 0nMay·an November 1 e (omit entry for payment of Interest.) Issued the bonds for cash at thelr face amount. 20Yl May 1 Pald the Interest on the bonds 20Y1 Nov. Called the bond Issue at 96, 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. 20YS Nov.

Explanation / Answer

Note :- Calculation Of interest paid

Face value x Interest rate

$ 363,000 x 12%/2 = $ 21,780

Interest rate is divied by two since interest payment semi annually but 12 % interest rate is given in question is annually.

Solution Journal Entries Date Particular Dr Amount Cr. Amount 20Y1 May-01 Cash A/c Dr. $ 363,000         To Bond Payable A/c $ 363,000 (Being Issue of bond at Face value) Nov-01 Interest Expenses A/c Dr. $21,780         To Cash A/c $ 21,780 (Being interest on bond paid on 1st nov) Nov-01 Bond Payable A/c Dr. $363,000         To Discount on Bond Payable $ 14,520         To Cash A/c $ 348,480 (Being called the bond at discount)

Note :- Calculation Of interest paid

Face value x Interest rate

$ 363,000 x 12%/2 = $ 21,780

Interest rate is divied by two since interest payment semi annually but 12 % interest rate is given in question is annually.

Please feel free to ask if anything about above solution in comment section of the question.

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