Question

Exercise 14-18 on June 30, 2010, culver Limited issued 11.75% bonds with a par value of $773,000 due in 20 years. They were issued at 96 and were callable at 105 at ayda te after une 30 2017 Because of lower interest rates and a significant change in the company's credit rating, it was decided to call the entire issue on June 30, 2017 and to issue new bonds. New 8% bonds were sold in the amount of $1 million at 102; they mature in 20 years. The company follows ASPE and uses straight-line amortization. The interest payment dates are December 31 and June 30 of each year Prepare journal entries to record the retirement of the old issue and the sale of the new issue on June 30, 2017. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit June 30, 2017 (To record retirement of old issue) June 30, 2017 To record sale of new issue)

Answer 1

Ans:

No.	Account Titles and Explanation	Debit		Credit
June 30,2017	Bonds Payable	$      773,000
	Loss on retirement of bonds	$       57,202
	Cash			$      811,650
	Discount on bonds			$        18,552
	(To record the redemption of the old issue)
June 30,2017	Cash (1000,000*102%)	$      1020,000
	Bonds Payable			$      1000,000
	Premium on bonds(Diff.)			$        20,000
	(To record the sale of the new issue)
Dec,31,2017	Interest Expense(Diff.)	$        38,000
	Premium on bonds(20,000*0.5/20)	$             2000
	Cash(1000,000*8%/2)			$        40,000
	To record interest payment and premium amortization for 6 months

Par Value	Issue/Redemption	Cash Recd or Paid	Discount	/Amortization	for 8 Yrs	Discount balance
773,000	96	742080	30920	1546	12,368	18,552
	105	811,650
	Carrying Value on June 30,2018		754,448
	(742080+12,368)
	Less: redemption value		811,650
	Loss on redemption		57,202