Sage Co. is building a new hockey arena at a cost of $2,310,000. It received a d

Question

Sage Co. is building a new hockey arena at a cost of $2,310,000. It received a downpayment of $490,000 from local businesses to support the project, and now needs to borrow $1,820,000 to complete the project. It therefore decides to issue $1,820,000 of 12%, 10-year bonds. These bonds were issued on January 1, 2016, and pay interest annually on each January 1. The bonds yield 11%.

Assume that on July 1, 2019, Sage Co. redeems half of the bonds at a cost of $1,001,900 plus accrued interest. Prepare the journal entry to record this redemption. (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.)

July 1, 2019

(To record interest)

July 1, 2019

Bonds Payable

(To record reacquisition)

I HAVE THE journal entry titles, I just need the numbers. I'm confused because its partial year for this last part. Also, can someone please tell me how they get the numbers. I never even knew that loss on redemption was a title used.

Explanation / Answer

As on July 1,2019 (To Record Interest and Premium Paid on Redemption of Bonds),

1. Interest Expenses is $ 109,200 ($1,820,000*12/100*6/12) (For Whole of the Bond)

2. Premium on Bonds is $ 91,900 ( Amount Actuall paid that is $ 1,001,900 - [$ 1,820,000/2]) (For Half of the bond which is redeem)

3. Cash is $ 201,100 ( Interest Expenses + Premium on Bonds)

As on July 1,2019 (To record reacquisition),

1. Bonds Payable is $ 910,000 (Half the Bond price of $ 1,820,000)

2. Premium on Bonds is $ 91,900 ( Amount Actuall paid that is $ 1,001,900 - [$ 1,820,000/2]) (For Half of the bond which is redeem)

3. Loss on Redemption on Bonds $ 91,900 (Amount Paid over and above of the face value)

4.. Cash is $ 1,001,900 ( Bonds Payable + Premium on Bonds)

* Premium on Bonds Will be Set off for Loss o Redemption on Bonds and accurest interest is paid in First entry it self

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