Exercise 14-13 Waterway, Inc. had outstanding $5,460,000 of 11% bonds (interest
ID: 2604606 • Letter: E
Question
Exercise 14-13 Waterway, Inc. had outstanding $5,460,000 of 11% bonds (interest payable July 31 and January 31) due in 10 years. On July 1, it issued $9,750,000 of 10%, 15-year bonds (interest payable July 1 and January 1) at 97. A portion of the proceeds was used to call the 11% bonds (with unamortized discount of $109,200) at 102 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 11% bonds)
Explanation / Answer
Date
Account Title & Explanation
Debit
Credit
1-Jul
Cash
9457500
Discount on bond payable
292500
Bond payable
9750000
(To record issuance of 10% bonds)
1-Aug
Bond payable
5460000
Loss on Redemption of bonds
218400
Cash (5460000 x 1.02= 5569200)
5569200
Discount on Bonds payable
109200
(To record retirement of 11% bonds)
Note:
Cash: 9750000 x .97 = 9457500
Discount on Bonds Payable: 9750000 - 9457500= 292500
Date
Account Title & Explanation
Debit
Credit
1-Jul
Cash
9457500
Discount on bond payable
292500
Bond payable
9750000
(To record issuance of 10% bonds)
1-Aug
Bond payable
5460000
Loss on Redemption of bonds
218400
Cash (5460000 x 1.02= 5569200)
5569200
Discount on Bonds payable
109200
(To record retirement of 11% bonds)
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