Question

On January 2, 2016, Prebish Corporation issued $1,500,000 of 10% bonds to yield 11% due December...

On January 2, 2016, Prebish Corporation issued $1,500,000 of 10% bonds to yield 11% due December 31, 2025. Interest on the bonds is payable annually, each December 31. The bonds are callable at 101 (i.e., at 101% of the face amount) and on January 2, 2019, Prebish called $1,500,000 face amount of the bonds and retired them. (100 POINTS)

Instructions

  1. Determine the price of the Prebish bonds, when issued on January 2, 2016.
  2. Prepare an Amortization Schedule for 2016-2020 for the bonds.
  3. Prepare the journal entry to record the retirement of $1,500,000 by Prebish on January 2, 2019.
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Homework Answers

Answer #1
Date Accounts Title Debit Credit
1/1/16 Cash       1,411,655
Bonds Payable       1,411,655
12/31/16 Interest Expense (1,411,655 x 11%)          155,282
Cash (1,500,000 x 10%)          150,000
Bonds Payable             5,282
1/2/19 Bonds Payable       1,429,308
Loss           85,692
Cash (1,500,000 x 1.01)       1,515,000
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