Please show work to ensure accuracy, and ONLY use the accounts given. Thank you
ID: 2590788 • Letter: P
Question
Please show work to ensure accuracy, and ONLY use the accounts given. Thank you very much.
On September 30, 2012, Sandhill Co. issued 11% bonds with a par value of $430,000 due in 20 years. They were issued at 98 and were callable at 105 at any date after September 30, 2017. Sandhill Co. was able to obtain financing at lower rates, it decided to call the entire issue on September 30, 2018, and to issue new bonds. New 9% bonds were sold in the amount of $810,000 at 104; they mature in 20 years. Sandhill Co. uses straight-line amortization. Interest payment dates are March 31 and September 30.
List of Accounts to Chose From
Accumulated Depreciation-Machinery
Accumulated Depreciation-Plant and Equipment
Allowance for Doubtful Accounts
Bad Debt Expense
Bond Issue Expense
Bonds Payable
Buildings
Cash
Common Stock
Cost of Goods Sold
Debt Investments
Depreciation Expense
Discount on Bonds Payable
Discount on Notes Payable
Discount on Notes Receivable
Equipment
Equity Investments
Gain on Disposal of Machinery
Gain on Disposal of Land
Gain on Disposal of Plant Assets
Gain on Redemption of Bonds
Gain on Restructuring of Debt
Gain on Sale of Machinery
Interest Expense
Interest Payable
Interest Receivable
Interest Revenue
Inventory
Land
Loss on Disposal of Equipment
Loss on Disposal of Land
Loss on Redemption of Bonds
Machinery
Mortgage Payable
No Entry
Notes Payable
Notes Receivable
Paid-in Capital in Excess of Par - Common Stock
Paid-in Capital in Excess of Par - Preferred Stock
Premium on Bonds Payable
Retained Earnings
Salaries and Wages Expense
Sales Revenue
Unamortized Bond Issue Costs
Unearned Revenue
Unearned Sales Revenue
Unrealized Holding Gain or Loss - Income Prepare journal entries to record the redemption of the old issue and the sale of the new issue on September 30, 2018. (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 O for the amounts.) Account Titles and Explanation Debit Credit (To record the redemption of old issue) (To record the sale of new issue)
Explanation / Answer
Solution:-
(a)Prepare journal entries to record the redemption of the old issue andthe sale of the new issue on September 30, 2018:-
Working note:-
(b) Prepare the entry required on December 31, 2018, to accrue interest and the amortization of premium on the bonds:-
Please Rate or comment if you have any doubt regarding this solution.
Account titles and explanation Debit Credit Bonds Payable 430,000 Loss on redumption of bonds 27,520 Discounts on bonds payable 6,020 Cash 451,500 (To record the redumption of old issue) Cash (810,000 * 104%) 842,400 Premium on bonds payable 32,400 Bonda payable 810,000 (To record the sale of new issue)