Homework Answers
Answer -
Step - (1) - Information Given -
On June 30, 2009, Monty company issued 12% bonds with a par value of $790000 due in 20 years. They were issued at 98 and were callable at 104.
It was decided to call the entire issue on June 30, 2018, and to issue new bonds. New 8% bonds were sold in the amount of $1100000 at 101; they mature in 20 years.
Monty company uses straight-line amortization. Interest payment dates are December 31 and June 30.
.
Step - (2) -
Journal of Monty company
| No. | Date | Account Titles and Explanation | Debit ($) | Credit($) |
| (a) | June 30, 2018 |
Bonds Payable Loss on Redemption of Bonds [Balancing figure] Discounts on Bonds Payable [($790000 * 2 % / 20 years ) * 11 years] Cash [$790000 * 104%] (To record the redemption of the old issue) |
790000 40290 - - - |
- - 8690 - 821600 |
| June 30, 2018 |
Cash [$1100000 * 101%] Premium on Bonds Payable [Balancing figure] Bonds Payable (To record the sale of the new issue) |
1111000 11000 - |
- - 1100000 |
|
| (b) | December 31, 2018 |
Interest Expense [Balancing figure] Premium on Bonds Payable [ ($11000 / 20 years) / 2] Cash [($1100000 * 8%) / 2] (To record payment of interest and amortization of premium) |
43725 275 - |
- - 44000 |
| Total | 1974290 | 1974290 | ||
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