Matt Perry, Inc. had outstanding $6,059,000 of 12% bonds (interest payable July
ID: 2456825 • Letter: M
Question
Matt Perry, Inc. had outstanding $6,059,000 of 12% bonds (interest payable July 31 and January 31) due in 10 years. On July 1, it issued $9,095,000 of 9%, 15-year bonds (interest payable July 1 and January 1) at 98. A portion of the proceeds was used to call the 12% bonds at 102 on August 1. Unamortized bond discount and issue cost applicable to the 12% bonds were $120,000 and $38,700, respectively.
Prepare the journal entries necessary to record issue of the new bonds and the refunding of the bonds. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
July 1
(To record issuance of 9% bonds.)
August 1
(To record retirement of 12% bonds.)
Date
Account Titles and Explanation
Debit
Credit
July 1
(To record issuance of 9% bonds.)
August 1
(To record retirement of 12% bonds.)
Explanation / Answer
Answer:
Journal Entries Date Accounts Title and Explanation Debit $ Credit $ Jul, 01 Cash 8,913,100 Discount on issue of bonds 181,900 9% Bonds payable 9,095,000 (To record issuance of 9% bonds.) Aug, 01 12% Bonds payable 6,059,000 Premium paid on retirement of bonds 121,180 Cash 6,180,180 (To record retirement of 12% bonds.) Aug, 01 Profit and Loss account 279,880 Premium paid on repayment of bonds 121,180 Bond Discount 120,000 Issue Cost 38,700 (To transfer premium, issue cost and discount to income statement)