Exercise 14-13 Martinez, Inc. had outstanding $5,770,000 of 12% bonds (interest

Question

Exercise 14-13 Martinez, Inc. had outstanding $5,770,000 of 12% bonds (interest payable July 31 and January 31) due in 10 years. On July 1, it issued $8,800,000 of 10%, 15-year bonds (interest payable July 1 and January 1) at 97. A portion of the proceeds was used to call the 12% bonds (with unamortized discount of $230,800) at 104 on August 1. Prepare the journal entries necessary to record issue of the new bonds and the refunding of the bonds. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date

Account Titles and Explanation

Debit

Credit

July 1

(To record issuance of 10% bonds)

August 1

(To record retirement of 12% bonds)

Explanation / Answer

1-Jul Cash 8536000 =8800000*0.97 Discount on bonds payable 264000         Bonds payable 8800000 1-Aug Bonds payable 5770000 Loss on Redemption of Bonds 461600         Cash 6000800 =5770000*1.04         Discount on Bonds Payable 230800

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