Question

Entries for Issuing and Calling Bonds; Gain

Emil Corp. produces and sells wind-energy-driven engines. To finance its operations, Emil Corp. issued $1,663,000 of 25-year, 10% 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:

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

Paid the interest on the bonds.

20Y1 Nov. 1

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

Answer 1

Solution:

Journal Entries - Emil Corp.
Date	Particulars	Debit	Credit
1-May-20Y1	Cash Dr	$1,663,000.00
	To Bond Payable		$1,663,000.00
	(To record issue of bond)
1-Nov-20Y1	Interest Expense Dr	$83,150.00
	To Cash		$83,150.00
	(To record payment of interest)
1-Nov-20Y5	Bond Payable Dr	$1,663,000.00
	To Cash		$1,613,110.00
	To Gain on retirement of bonds		$49,890.00
	(To record early retirement of callable bonds)