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 Corp. issued $1,446,000 of 15-year, 10% 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:

Issued the bonds for cash at their face amount.

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 98, the rate provided in the bond indenture. (Omit entry for payment of interest.) Year 1 May 1 Paid the interest on the bonds. Year 1 Nov. 1 Called the bond issue at 98, the rate provided in the bond indenture. (Omit entry for payment of interest.) If an amount box does not require an entry, leave it blank. Year 5 Nov. 1

Explanation / Answer

Journal entry :

Date accounts & explanation debit credit Year 1, May 1 Cash 1446000 Bonds payable 1446000 Year 1, Nov 1 Interest expenses (1446000*10%*6/12) 72300 Cash 72300 Year 5, Nov 1 Bonds payable 1446000 Gain on redemption of bonds 28920 Cash 1417080

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