Question

Hoover Corp., a wholesaler of music equipment, issued $32,700,000 of 20-year, 6% callable bonds on March 1, Year 1, at their face amount, with interest payable on March 1 and September 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

 Mar. 1 Issued the bonds for cash at their face amount. 

 Sept.  1 Paid the interest on the bonds. 

Year 3 

  Sept. 1 Called the bond issue at 102, the rate provided in the bond indenture. (Omit entry for payment of interest.)

Journal Journalize the entries to record the transactions for the Year 1. Refer to the Chart of Accounts for exact wording of account titles. 

Journalize the entries to record the transactions for the Year 3. Refer to the Chart of Accounts for exact wording of account titles. 

Answer 1

1
Date	Description	Debit	Credit	Assets	Liabilities	Equity
Mar 1	Cash	32700000		↑
	Bonds payable		32700000		↑
Sept 1	Interest expense	981000				↓
	Cash		981000	↓
2
Date	Description	Debit	Credit	Assets	Liabilities	Equity
Sept 1	Bonds payable	32700000			↓
	Loss on redemption of Bonds	654000				↓
	Cash		33354000	↓