Question

Adele Corp., a wholesaler of music equipment, issued $33,100,000 of 20-year, 4% callable bonds on March 1, 20Y1, 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.

20Y1
Mar.	1	Issued the bonds for cash at their face amount.
Sept.	1	Paid the interest on the bonds.
20Y5
Sept.	1	Called the bond issue at 102, the rate provided in the bond indenture. (Omit entry for payment of interest.)

Answer 1

Date	Description	Debit	Credit	Assets	Liabilities	Equity
20Y1
Mar 1	Cash	33100000		↑
	Bonds payable		33100000		↑
Sept 1	Interest expense	662000				↓	=33100000*4%/2
	Cash		662000	↓
20Y2
Sept 1	Bonds payable	33100000			↓
	Loss on Redemption of Bonds	662000				↓
	Cash		33762000	↓			=33100000*1.02