Payinent or interest.) EX 14-9 Entries for issuing and calling bonds; gain Emil

Question

Payinent or interest.) EX 14-9 Entries for issuing and calling bonds; gain Emil Corp. produces and sells wind-energy -driven engines. To finance its operations, Emil Corp. issued $15,000,000 of 20-year, 996 callable bonds on May 1, 20Y1, 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: OBJ.3 20Y1 May 1. Issued the bonds for cash at their face amount. Nov. 1. Paid the interest on the bonds. 20Y5 Nov. 1. Called the bond issue at 96, the rate provided in the bond indenture. Omit entry for payment of interest.)

Explanation / Answer

May 1, 20Y1 Cash $ 1,50,00,000 Bonds payable $    1,50,00,000 Nov 1, 20Y1 Interest expense (15000000*9%*1/2) $        6,75,000 Cash $          6,75,000 Nov 1, 20Y5 Bonds payable $ 1,50,00,000 Gain on redemption of bonds $          6,00,000 Cash (15000000*96%) $    1,44,00,000

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