Question

Exercise 14-13 Waterway, Inc. had outstanding $5,460,000 of 11% bonds (interest payable July 31 and January 31) due in 10 years. On July 1, it issued $9,750,000 of 10%, 15-year bonds (interest payable July 1 and January 1) at 97. A portion of the proceeds was used to call the 11% bonds (with unamortized discount of $109,200) at 102 on August 1. 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 10% bonds) August 1 (To record retirement of 11% bonds)

Answer 1

Date	Account Title & Explanation	Debit	Credit
1-Jul	Cash	9457500
	Discount on bond payable	292500
	Bond payable		9750000
	(To record issuance of 10% bonds)
1-Aug	Bond payable	5460000
	Loss on Redemption of bonds	218400
	Cash (5460000 x 1.02= 5569200)		5569200
	Discount on Bonds payable		109200
	(To record retirement of 11% bonds)

Note:

Cash: 9750000 x .97 = 9457500
Discount on Bonds Payable: 9750000 - 9457500= 292500