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Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
ISBN: 9781285866307

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BuyFindarrow_forward

Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
ISBN: 9781285866307
Textbook Problem

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, 9% 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:

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 96, the rate provided in the bond indenture. (Omit entry for payment of interest.)

To determine

Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

To prepare: Journal entry to record issuance of the bonds for cash at face amount.

Explanation

Prepare journal entry for issuance of bonds at face amount on May 1.

Date Accounts and Explanation Post Ref Debit ($) Credit ($)
May 1, 2016 Cash   15,000,000  
   
To determine

To prepare: Journal entry to record the payment of interest on the bonds on November 1.

To determine

To Journalize: The redemption of the bonds.

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