On June 30, 2012, Crane Company issued 12% bonds with a par value of $770,000 due in 20 years. They were issued at 98 and were callable at 103 at any date after June 30, 2020. Because of lower interest rates and a significant change in the company’s credit rating, it was decided to call the entire issue on June 30, 2021, and to issue new bonds. New 10% bonds were sold in the amount of $1,000,000 at 102; they mature in 20 years. Crane Company uses straight-line amortization. Interest payment dates are December 31 and June 30.(a) Prepare journal entries to record the redemption of the old issue and the sale of the new issue on June 30, 2021.(b) Prepare the entry required on December 31, 2021, to record the payment of the first 6 months’ interest and the amortization of premium on the bonds. Account Titles and ExplanationDebitCreditiе 30, 2021Bonds Payable770000Loss on Redemption of BondsDiscount on Bonds PayableCash793100(To record the redemption of the old issue)е 30, 2021CashBonds PayablePremium on Bonds Payable(To record the sale of the new issue)c. 31, 2021Interest ExpensePremium on Bonds PayableCash On June 30, 2012, Crane Company issued 12% bonds with a par value of $770,000 due in 20 years. They were issued at 98 and werecallable at 103 at any date after June 30, 2020. Because of lower interest rates and a significant change in the company's creditrating, it was decided to call the entire issue on June 30, 2021, and to issue new bonds. New 10% bonds were sold in the amount of$1,000,000 at 102; they mature in 20 years. Crane Company uses straight-line amortization. Interest payment dates are December31 and June 30.(a)Prepare journal entries to record the redemption of the old issue and the sale of the new issue on June 30, 2021.(b)Prepare the entry required on December 31, 2021, to record the payment of the first 6 months' interest and theamortization of premium on the bonds.(Round answers to O decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Journal entry is defined as the one which is used for recording the business transactions in the…

Answered: On June 30, 2012, Crane Company issued…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 16E

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On June 30, 2012, Crane Company issued 12% bonds with a par value of $770,000 due in 20 years. They were issued at 98 and were callable at 103 at any date after June 30, 2020. Because of lower interest rates and a significant change in the company’s credit rating, it was decided to call the entire issue on June 30, 2021, and to issue new bonds. New 10% bonds were sold in the amount of $1,000,000 at 102; they mature in 20 years. Crane Company uses straight-line amortization. Interest payment dates are December 31 and June 30.

(a)		Prepare journal entries to record the redemption of the old issue and the sale of the new issue on June 30, 2021.
(b)		Prepare the entry required on December 31, 2021, to record the payment of the first 6 months’ interest and the amortization of premium on the bonds.

Account Titles and Explanation
Debit
Credit
iе 30, 2021
Bonds Payable
770000
Loss on Redemption of Bonds
Discount on Bonds Payable
Cash
793100
(To record the redemption of the old issue)
е 30, 2021
Cash
Bonds Payable
Premium on Bonds Payable
(To record the sale of the new issue)
c. 31, 2021
Interest Expense
Premium on Bonds Payable
Cash

On June 30, 2012, Crane Company issued 12% bonds with a par value of $770,000 due in 20 years. They were issued at 98 and were
callable at 103 at any date after June 30, 2020. Because of lower interest rates and a significant change in the company's credit
rating, it was decided to call the entire issue on June 30, 2021, and to issue new bonds. New 10% bonds were sold in the amount of
$1,000,000 at 102; they mature in 20 years. Crane Company uses straight-line amortization. Interest payment dates are December
31 and June 30.
(a)
Prepare journal entries to record the redemption of the old issue and the sale of the new issue on June 30, 2021.
(b)
Prepare the entry required on December 31, 2021, to record the payment of the first 6 months' interest and the
amortization of premium on the bonds.
(Round answers to O decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.
Credit account titles are automatically indented when amount is entered. Do not indent manually.)

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