Question

Entries for Issuing and Calling Bonds; Gain

Emil Corp. produces and sells wind-energy-driven engines. To finance its operations, Emil Corp. issued $1,823,000 of 15-year, 14% callable bonds on May 1, 20Y1, at their face amount, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year.

Journalize the entries to record the following selected transactions:

accounts payable/bonds payable/cash/interest expense/interest payable/loss on redemption of bonds/gain on redemption of bonds/

20Y1
May 1	Issued the bonds for cash at their face amount.
Nov. 1	Paid the interest on the bonds.
20Y5
Nov. 1	Called the bond issue at 97, the rate provided in the bond indenture. (Omit entry for payment of interest.)

Issued the bonds for cash at their face amount.

20Y1, May 1		fill in the blank 53bf5701efa2f81_2
			fill in the blank 53bf5701efa2f81_4

Paid the interest on the bonds.

20Y1, Nov. 1		fill in the blank 4691ea0b1fe206e_2
			fill in the blank 4691ea0b1fe206e_4

Called the bond issue at 97, the rate provided in the bond indenture. (Omit entry for payment of interest.) For a compound transaction, if an amount box does not require an entry, leave it blank.

20Y5, Nov. 1		fill in the blank d9e4a0fc306900a_2	fill in the blank d9e4a0fc306900a_3
		fill in the blank d9e4a0fc306900a_5	fill in the blank d9e4a0fc306900a_6
		fill in the blank d9e4a0fc306900a_8	fill in the blank d9e4a0fc306900a_9

Answer 1

May 1, 20Y1

Cash account Debit $ 1,823,000

To, Bonds payables a/c Credit $ 1,823,000

(Being Issued the bonds for cash at their face amount)

Nov 1, 20Y1

Interest expense Dr   $ 127,610

To, cash account $127,610 (1,823,000*14%*6/12)

(Being Paid the interest on the bonds)

Nov 1, 20Y5

Bonds payable Dr $1,823,000

To Gain on redemption of bonds $ 54,690

To cash account $ 1,768,310 (1,823,000*97% = $ 1,768,310)

(Being Called the bond issue at 97)