Mia Breen Corp. produces and sells wind-energy-driven engines. To finance its operations, Mia Breen issued $30,500,000 of 20-year, 10% callable bonds on May 1, Year 1, 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. Refer to the Chart of Accounts for exact wording of account titles.
Year 1 | ||
May | 1 | Issued the bonds for cash at their face amount. |
Nov. | 1 | Paid the interest on the bonds. |
Year 5 | ||
Nov. | 1 | Called the bond issue at 99, the rate provided in the bond indenture. (Omit entry for payment of interest.) |
CHART OF ACCOUNTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mia Breen Corp. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General Ledger | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Interest calculation for Year 1 Nov = 30,500,000*10%*6/12 = 1,525,000
Gain on redemption = 30,500,000*1% = 305,000
Year 1 | |||
May | Issued the bonds for cash at face value | ||
Cash | Debit | 30,500,000 | |
Bonds Payable | Credit | 30,500,000 | |
Nov | Paid the interest on bonds | ||
Interest Expense | Debit | 1,525,000 | |
Cash | Credit | 1,525,000 | |
Year 5 | Called the bond issue at 99 | ||
May | Bonds Payable | Debit | 30,500,000 |
Gain on redemption of bonds | Credit | 305,000 | |
Cash | Credit | 30,195,000 | |
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