Nash, Inc. had outstanding $5,700,000 of 11% bonds (interest payable July 31 and

Question

Nash, Inc. had outstanding $5,700,000 of 11% bonds (interest payable July 31 and January 31) due in 10 years. On July 1, it issued $9,530,000 of 11%, 15-year bonds (interest payable July 1 and January 1) at 98. A portion of the proceeds was used to call the 11% bonds (with unamortized discount of $114,000) at 102 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 11% bonds)

Explanation / Answer

Prepare the journal entries necessary to record issue of the new bonds and the refunding of the bonds.

Date accounts & explanation debit credit July 1 Cash (9530000*98/100) 9339400 Discount on bonds payable 190600 11% bonds payable 9530000 (To record bonds issue) Aug 1 11% Bonds payable 5700000 Loss on retirement of bonds 228000 Discount on bonds payable 114000 Cash (5700000*1.02) 5814000 (To record retirement of 11% bonds)

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