Question

Mia Breen Corp. produces and sells wind-energy-driven engines. To finance its operations, Mia Breen issued $920,000 of 20-year, 11% callable bonds on May 1, 2045, 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: 2015 May 1 Issued the bonds for cash at their face amount. Nov. 1 Paid the interest on the bonds. 2019 Nov. 1 Called the bond issue at 97, the rate provided in the bond indenture. (Omit entry for payment of interest.) If an amount box does not require an entry, leave it blank. Issued the bonds for cash at their face amount. 2015 May 1 Cash 920,000 Bonds Payable 920,000 Feedback Paid the interest on the bonds. 20Y5 Nov. 1 Interest Expense 50,600 Cash 50.600

Answer 1

Face value of bonds= $920,000

Call price = 97

Cash paid to retire bonds = 920,000 x 97%

= $892,400

Gain on bond retirement = Face value of bonds- Cash paid to retire bonds

= 920,000-892,400

= $27.600

Date	General journal	Debit	Credit
Nov. 1, 2009	Bonds payable	$920,000
	Gain on redemption of bonds		$27,600
	Cash		$892,400

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