Matt Perry, Inc. had outstanding $6,125,000 of 11% bonds (interest payable July
ID: 2485042 • Letter: M
Question
Matt Perry, Inc. had outstanding $6,125,000 of 11% bonds (interest payable July 31 and January 31) due in 10 years. On July 1, it issued $9,156,000 of 10%, 15-year bonds (interest payable July 1 and January 1) at 99. A portion of the proceeds was used to call the 11% bonds at 103 on August 1. Unamortized bond discount and issue cost applicable to the 11% bonds were $120,000 and $38,100, 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.)
Explanation / Answer
Answer:
Issuing Bonds:
Cash A/C Dr. $9064440
Discount on Bonds Payable A/c dr. $91560
To Bonds Payable A/C $9156000
Retiring Bonds:
Bonds Payable A/C Dr. $6125000
Loss on Redemption of Bonds A/C Dr. $341850
To cash A/C $6308750 (6125000*1.03)
To Discount on Bonds Payable A/C $120000
To Unamortized Bond Issue cost A/C $38100