Coronado, Inc. had outstanding $6,360,000 of 12% bonds (interest payable July 31

Question

Coronado, Inc. had outstanding $6,360,000 of 12% bonds (interest payable July 31 and January 31) due in 10 years. On July 1, it issued $8,450,000 of 11%, 15-year bonds (interest payable July 1 and January 1) at 99. A portion of the proceeds was used to call the 12% bonds (with unamortized discount of $254,400) at 104 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 11% bonds)

August 1

(To record retirement of 12% bonds)

Date

Account Titles and Explanation

Debit

Credit

July 1

(To record issuance of 11% bonds)

August 1

(To record retirement of 12% bonds)

Explanation / Answer

Journal entry :

Date accounts & explanation debit credit July 1 Cash (8450000*99/100) 8365500 Discount on bonds payable 84500     Bonds payable 8450000 (To record issuance of 11% bonds) Aug 1 Bonds payable 6360000 Loss on retirement of bonds 508800     Discount on bonds payable 254400     Cash (6360000*1.04) 6614400 (To record retirement of 12% bonds)

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