PLEASE Correct the boxes in RED. & Show all work to ensure accuracy. Please answ

Question

PLEASE Correct the boxes in RED. & Show all work to ensure accuracy. Please answer the question as asked. The answers in GREEN are correct. Thank you

Practice Exercise 14-3 On September 30, 2012, Blossom company issued 9% bonds with a par value of $470,000 due in 20 years. They were issued at 98 and were callable at 10 at any date after September 30, 2017. Because Blossom Company was able to obtain financing at lower rates, it decided to call the entire issue on September 30, 2018, and to issue new bonds. New 8% bonds were sold in the amount of $740,000 at 103; they mature in 20 years. Blossom Company uses straight-line amortization. Interest payment dates are March 31 and September 30. Your answer is correct. Prepare journal entries to record the redemption of the old issue and the sale of the new issue on September 30, 2018. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Debit Credit Account Titles and Explanation Bonds Payable Loss on Redemption of Bonds 470,000 30,080 Discount on Bonds Payable 6580 Cash 493500 (To record the redemption of old issue) Cash 762,200 Premium on Bonds Payable 22,200 Bonds Payable 740,000 (To record the sale of new issue)

Explanation / Answer

Interest payable = $740000 * 8% * 3/12 = $14800

Premium amortized = $22200/ 40 * 1/2 = $277.50

Interest expense = $14800 - $277.50 = $14522.50

The journal entry would be:

Interest Expense Dr $14522.50

Premium on bonds payable Dr $277.50

To Interest Payable $14800

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