10. Wesley Corporation issued S600 000 of 10% 20-y bonds are dated July 1, 2006,

Question

10. Wesley Corporation issued S600 000 of 10% 20-y bonds are dated July 1, 2006, mature on July 1,2026 and call for s payments on July 1 and January 1. The hond indenture provides bends on July 1 20 el interest 2006, at 9n The notice, the issui that, upon proper ng comoration may rodeem its bonds, in whole or in part, on ay fer December 31, 2006, at 105, In 2016 the corporation notifies holders of 5200,000 face value of bonds will be called for redemption on July 1, 2016. Interest coupons the interest payment due on July 1.2016, are to remain attached to the bonds called for redemption. The company's accounting year ends on July 30. Assuming all of the bonds called are surrendered, the entry to record the redemption of the bonds is A) Bonds Payable 200,000 Bond Interest Payable Loss on Bond Redemption 10,000 220,000 B) Bonds Payable 200,000 10,000 Bond Interest Payable Loss On Bond Redemption Cash Discount on Bonds Payable 220,000 3,000 C) Bonds Payable 200,000 13,000 Loss on Bond Redemption 210,000 3,000 Cash Discount on Bonds Payable 200,000 10,000 19,000 D) Bonds Payable Discount on Bond Interest Payable Loss On Bond Redemption Cash Bonds Payable 220,000 9,000 11. A 10-year lease of property requires annual rental payments on each December 31 of an amount equal to 5% ofsales for the year then ended. The 10 annual rents can be described as an annuity A) True B) False 2. A bond may be A) callable

Explanation / Answer

Journal entry to record the redemption of bonds will be:

Year Particulars L.F Debit ($) Credit ($) 2016 Jul-01 Bonds payable 200,000 Bond Interest payable (200,000*10%*6/12) 10,000 Loss on Redemption of bonds 13,000 Discount on Notes Payable (150*20) 3,000 Cash 220,000 (For bonds redeemed)

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