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Crane, Inc. had outstanding $5,860,000 of 11% bonds (interest payable July 31 and January 31) due...

Crane, Inc. had outstanding $5,860,000 of 11% bonds (interest payable July 31 and January 31) due in 10 years. On July 1, it issued $9,880,000 of 11%, 15-year bonds (interest payable July 1 and January 1) at 97. A portion of the proceeds was used to call the 11% bonds (with unamortized discount of $58,600) at 101 on August 1. Prepare the journal entries necessary to record issue of the new bonds and the refunding of the bonds.

(To record issuance of 11% bonds)

(To record retirement of 11% bonds)

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Answer #1

Journal entries

No Account and explanation Debit Credit
a Cash (9880000*.97) 9583600
discount on bonds payable 296400
Bonds payable 9880000
(To record bond issue)
b Bonds payable 5860000
Loss on retirement of bonds 117200
Discount on bonds payable 58600
Cash (5860000*1.01) 5918600
(To record retirement)
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