Entries for Issuing and Calling Bonds; Gain Emil Corp. produces and sells wind-e

Question

Entries for Issuing and Calling Bonds; Gain Emil Corp. produces and sells wind-energy-driven engines. To finance its operations, Emil Corp. issued $1,031,000 of 10-year, 896 callable bonds on May 1, 20Y1, at their face amount, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions: 20Y1 May 1 Issued the bonds for cash at their face amount. Nov. 1 Paid the interest on the bonds. 20YS Nov. 1 Called the bond Issue at 96, the rate provided In the bond Indenture. (Omit entry for payment of interest.) Issued the bonds for cash at their face amount. 20Y1 May 1 Paid the interest on the bonds 20Y1 Nov. 1

Explanation / Answer

Date General Journal Debit Credit 20Y1 May 1 Cash 1,031,000 Bonds Payable 1,031,000 Nov 1 Interest Expense(1031000 x 8%/2) 41,240 Cash 41,240 20Y5 Nov 1 Bonds Payable 1,031,000 Gain on Redemption of Bonds 41,240 Cash* 989,760 * $1,031,000 × 0.96

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