Entries for Issuing and Calling Bonds; Loss Polders Corp., a wholesaler of offic

Question

Entries for Issuing and Calling Bonds; Loss

Polders Corp., a wholesaler of office equipment, issued $17,960,000 of 10-year, 14% callable bonds on March 1, 2014, with interest payable on March 1 and September 1. The fiscal year of the company is the calendar year.

Journalize the entries to record the above selected transactions.

Issued the bonds for cash at their face amount.

2014 Mar. 1

  

  

  

  

Paid the interest on the bonds.

2014 Sept. 1

  

  

  

  

Called the bond issue at 103, the rate provided in the bond indenture. (Omit entry for payment of interest.) For a compound transaction, if an amount box does not require an entry, leave it blank.

2018 Sept. 1

  

  

  

  

  

  

  

  

  

2014 Mar. 1 Issued the bonds for cash at their face amount. Sept. 1 Paid the interest on the bonds. 2018 Sept. 1 Called the bond issue at 103, the rate provided in the bond indenture. (Omit entry for payment of interest.)

Explanation / Answer

Mar 1, 2014:

Cash Dr $17,960,000

To Bond Payable $17,960,000

(14% callable bonds issued at par)

Sept. 1,2014 :

Interest Expense $1257200

To Cash $1257200

(Interest on bond paid, Amt = $17960000 * 14% * 1/2 = $1257200)

Sept 1, 2018 :

Bond Payable $17960000

Loss on redemption of bond $359200

To Cash $18319200

(Bonds redeemed at a premium of $2)

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