Emil Corp. produces and sells wind-energy-driven engines. To finance its operati

Question

Emil Corp. produces and sells wind-energy-driven engines. To finance its operations, Emil Corp. issued $31,400,000 of 20-year, 5% callable bonds on May 1, 2016 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. Be sure to include the year in the date for the entries recording the issue and calling of the bonds. Refer to the Chart of Accounts for exact wording of account titles.

Journalize the entries to record the selected transactions. Be sure to include the year in the date for the entries recording the issue and calling of the bonds. Refer to the Chart of Accounts for exact wording of account titles.

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JOURNAL

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2016 May 1 Issued the bonds for cash at their face amount. Nov. 1 Paid the interest on the bonds. 2022 Nov. 1 Called the bond issue at 99, the rate provided in the bond indenture. (Omit entry for payment of interest.)

Explanation / Answer

Required journal entries are as prepared below:

Year Particulars L.F Debit ($) Credit ($) 2016 May-01 Cash 31,400,000 5% Bonds payable 31,400,000 (for 5% 20-year Bond issued at par) 2016 Nov-01 Interest Expense 785,000 Cash (31,400,000*5%*6/12) 785,000 (for interest for 6 months paid 2022 Nov-01 5% Bond payable 31,400,000 Cash (31,400,000*.99) 31,086,000 Gain on redemption of bonds 314,000 (For bonds called at 99)

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