Question

CALCULATOR PRINTER VERSION BACK NEX Problem 14-04 Marigold Company issued its 8%, 25-year mortgage bonds in the principal amount of $3,040,000 on January 2, 2006, at a discount of $152,000, which it proceeded to amortize by charges to expense over the life of the issue on a straight-line basis. The Indenture securing the issue provided that the bonds could be called for redemption in total but not in part at any time before maturity at 105% of the principal amount, but it did not provide for any sinking fund. On December 18, 2020, the company issued its 10%, 20-year debenture bonds in the principal amount of $4,150,000 at 102, and the proceeds were used to redeem the 8%, 25-year mortgage bends on January 2, 2021. The Indenture securing the new issue did not provide for any sinking fund or for redemption before maturity (a) Prepare journal entries to record the issuance of (1) the 10% bonds and (2) the redemption of the 8% bonds. (If no entry is required, select "No Entry for the count wirles and entero for the amounts Credit account titles are automatically indented when amount is entered. Do not indent manually) Date Account Titles and Explanation Debit Credit (1) December 18, 2020 (2) January 2, 2021 (1) Ind the income statement treatment of the go or from redemption reported Question Attempts of sused SUBMIT ANSWER MacBook Air

Answer 1

Par value of 8% 25year Mortgage bonds			30,40,000
Total discount on issuance of bonds			1,52,000
Divide: Period of bonds				25
Discount amortized annually				6080
Multiply: Period expired from Jan 2006 to Jan 2021		15
Discount amortized in total				91200
Discount unamortized (152000-91200)			60800
Book value of bonds (3040,000-60800)			29,79,200
Redemption Price (4150,000*102%)			42,33,000
Loss on redemption of bonds				12,53,800
Journal entries
S.no.	Accounts title and explanations		Debit $	Credit $
18.12.20	Cash account			42,33,000
	10% bonds payable			41,50,000
	Premium on bonds payable			83,000
	(for issuance of bonds)
02.01.21	8% 25 year mortgage bonds payable	30,40,000
	Loss on redemption of bonds		12,53,800
	Cash account				42,33,000
	Discount on bonds payable			60,800
	(for redemption of bonds)