Matt Perry, Inc. had outstanding $6,226,000 of 12% bonds (interest payable July
ID: 2647841 • Letter: M
Question
Matt Perry, Inc. had outstanding $6,226,000 of 12% bonds (interest payable July 31 and January 31) due in 10 years. On July 1, it issued $9,084,000 of 8%, 15-year bonds (interest payable July 1 and January 1) at 97. 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 $121,000 and $39,400, respectively.
Prepare the journal entries necessary to record issue of the new bonds and the refunding of the bonds.
Explanation / Answer
Date Particulars Debit Credit 01-Jul Cash / Bank a/c 8811480 Discount on Bonds 272520 8% - 15 year Bonds Payable 9084000 To record 8% bonds 15 year maturity bonds issue 31-Jul Interest on 12% Bonds 1488190 Unamorised bond discount 6050 To Bank 1494240 recording of interest for 6 months @ 12%