Skysong, Inc. had outstanding $5,700,000 of 11% bonds (interest payable July 31

Question

Skysong, Inc. had outstanding $5,700,000 of 11% bonds (interest payable July 31 and January 31) due in 10 years. On July 1, it issued $9,530,000 of 11%, 15-year bonds (interest payable July 1 and January 1) at 98. A portion of the proceeds was used to call the 11% bonds (with unamortized discount of $114,000) at 102 on August 1.

Prepare the journal entries necessary to record issue of the new bonds and the refunding of the bonds.

Date Account Titles and Explanation Debit Credit July 1 Cash 9339400 Discount on Bonds Payable 190600 Bonds Payable 9530000 (To record issuance of 11% bonds) August 1 Bonds Payable 5700000 Loss on Redemption of Bonds Cash Discount on Bonds Payable

Explanation / Answer

1-Jul Cash 9339400 =9530000*0.98 Discount on Bonds payable 190600       Bonds payable 9530000 1-Aug Bonds payable 5700000 Loss on redemption of bonds 228000        Cash 5814000 =5700000*1.02        Discount on Bonds payable 114000

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