Question

Question 7 Legally Yours, a law firm, sells $8,000,000 of four-year, 8% bonds priced to yield 6,6%. The bonds are dated January 1, 2021, but due to some regulatory hurdles are not issued until March 1, 2021. Interest is payable on January 1 and July 1 each year. The bonds sell for $8,388,175 plus accrued interest. in mid-June, Legally Yours earns an unusually large fee of $11,000,000 for one of its cases. They use part of the proceeds to buy back the bonds in the open market on July 1, 2021 after the interest payment has been made, Legally Yours pays a total of $8.456,234 to reacquire the bonds and retires them. Prepare journal entries to record: a. The issuance of the bonds-assume that Legally Yours has adopted a policy of crediting interest expense for the accrued interest on the date of sale. b. Payment of interest and related amortization on July 1, 2021. c. Reacquisition and retirement of the bonds. Date Explanation/Account Credit
prepare journal entries to record a b and c

Answer 1

DATE EXPLANATION DEBIT CREDIT 83,88,175 Cash 83,88,175 Bonds payable [Being Issuance of bonds] July, 1,2021| 388, 175 80,00,000 83,88,175 Bond Interest Expense Bond payable cash I Being payment of Interest on July,l; 2021) 83,8 8,175 Bonds payable Loss on Reacquisition 68,059 Cash 84, 56,234 [Being Loss anised on Reacquisition and retirement of bonds]