Adele Corp., a wholesaler of music equipment, issued $22,000,000 of 20-year, 7%

Question

Adele Corp., a wholesaler of music equipment, issued $22,000,000 of 20-year, 7% callable bonds on March 1, 2016 at their face amount, with interest payable on March 1 and September 1. The fiscal year of the company is the calendar year.

Journalize the entries to record the following selected transactions. Be sure to include the year in the date for the entries recording the issue and calling of the bonds.

2016 Mar. 1 Issued the bonds for cash at their face amount. Sept. 1 Paid the interest on the bonds. 2020 Sept. 1 Called the bond issue at 102, the rate provided in the bond indenture. (Omit entry for payment of interest.)

Explanation / Answer

Adele Corp Journal entry   Date Account Title Dr $ Cr$ Mar 1.2016. Cash              22,000,000 Bonds Payable          22,000,000 Sep 1. 2016. Interest Expense                  770,000 Cash                770,000 Sep1. 2020 Bonds Payable            22,000,000 Loss On Early Redemption of Debt                  440,000 Cash          22,440,000 ( called bond at 2% premium )

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