# 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, 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: BuyFindarrow_forward ### Financial Accounting 15th Edition Carl Warren + 2 others Publisher: Cengage Learning ISBN: 9781337272124 #### Solutions Chapter Section BuyFindarrow_forward ### Financial Accounting 15th Edition Carl Warren + 2 others Publisher: Cengage Learning ISBN: 9781337272124 Chapter 14, Problem 9E Textbook Problem 254 views ## 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, 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:

To determine

Prepare journal entry for the given transaction.

### Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued 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 $1,000 per bond, to raise fund for financing the operations. Prepare journal entry for issuance of bonds at face amount on May 1.  Date Accounts and Explanation Post Ref Debit ($) Credit ($) May 1, 20Y1 Cash 15,000,000 Bonds Payable 15,000,000 (To record the issuance of bonds payable at face value) Table (1) • Cash is an asset and it is increased. So, debit it by$15,000,000.
• Bonds payable is a liability and it is increased. So, credit it by $15,000,000. Prepare journal entry for interest payment on November 1.  Date Accounts and Explanation Post Ref Debit ($) Credit ($) November 1, 20Y1 Interest Expense (1) 675,000 Cash 675,000 (To record the payment of semiannual interest) Table (2) • Interest expense is an expense and it decreases the equity value. So, debit it by$675,000.
• Cash is an asset and it is decreased. So, credit it by $675,000. Working note (1): Interest expense = Bonds payable×interest rate×Time periods =$15,000,000×9%×612                          = \$675,000

Journalize the redemption of the bonds

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