Holiday Company issued its 9%, 25-year mortgage bonds in theprincipal amount of

Question

Holiday Company issued its 9%, 25-year mortgage bonds in theprincipal amount of $3,261,000 on January 2, 1996, at a discount of$165,000, which it proceeded to amortize by charges to expense overthe life of the issue on a straight-line basis. The indenturesecuring the issue provided that the bonds could be called forredemption in total but not in part at any time before maturity at104% of the principal amount, but it did not provide for anysinking fund.

On December 18, 2010, the company issued its 11%, 20-yeardebenture bonds in the principal amount of $4,253,000 at 102, andthe proceeds were used to redeem the 9%, 25-year mortgage bonds onJanuary 2, 2011. The indenture securing the new issue did notprovide for any sinking fund or for retirement before maturity.

Prepare journal entries to record the issuance of the 11% bondsand the retirement of the 9% bonds.

BondsPayable                                                 3,261,000   

Loss on Redemption of Bonds                         229,440

          Cash                                                                                         3,391,440

          Discount on Bonds Payable                                                         99,000      

(To record retirement ofbonds.)    

Thank you in advance for your help, having some difficultywith the numbers in Red.

Explanation / Answer

From 1996 –2010 15 years Amortization of Discount of Notes 99,000.00 Discount on Notes payable balance 66,000.00 Bonds Payable 3,261,000.00 Loss on Redemption of Bonds 196,440.00 Cash 3,391,440.00 Discount on Notes payable 66,000.00

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.