Entries for Issuing and Calling Bonds; Gain Mia Breen Corp, produces and sells w

Question

Entries for Issuing and Calling Bonds; Gain Mia Breen Corp, produces and sells wind-energy-driven engines. To finance its operations, Mia Breen issued $18,000,000 of 20-year, 4% callable bonds on May 1, Year 1, 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: Year 1 May 1 Issued the bonds for cash at their face amount. Nov. 1 Paid the interest on the bonds. Year 5 Nov. 1 Called the bond issue at 99, the rate provided in the bond indenture (Omit entry for payment of interest.) Issued the bonds for cash at their face amount Year 1 May 1 Cash Bonds Payable Feedback Paid the interest on the bonds Year 1 Nov. 1 Interest Expense Cash

Explanation / Answer

Journal entries: Date Accounts title and explanation Debit $ Credit $ 1-May Cash account Dr. 18,000,000     Bonds payable account 18,000,000 1-Nov Interest expense Account Dr. 360000     Cash account (18000,000*4%*6/12) 360000 Nov 1 Yr5 Bonds payable Account Dr. 18,000,000      Cash account 17,820,000       Gain on redemption of bonds (18000,000*1%) 180000

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