Question

Entries for Issuing and Calling Bonds; Gain

Mia Breen Corp. produces and sells wind-energy-driven engines. To finance its operations, Mia Breen issued $1,137,000 of 10-year, 12% callable bonds on May 1, 20Y5, 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:

20Y5

May 1Issued the bonds for cash at their face amount.

Nov. 1Paid the interest on the bonds.

20Y9

Nov. 1Called the bond issue at 95, the rate provided in the bond indenture. (Omit entry for payment of interest.)

If an amount box does not require an entry, leave it blank.

Issued the bonds for cash at their face amount.

20Y5 May 1

Paid the interest on the bonds.

20Y5 Nov. 1

Called the bond issue at 95, the rate provided in the bond indenture. (Omit entry for payment of interest.)

20Y9 Nov. 1

Check My Work

Answer 1

Journal entries
Date	Accounts title and explanations		Debit $	Credit $
a.	Cash account			11,37,000
	Bonds payable				11,37,000
	(for bonds issued)
b.	Interest expense			68,220
	Cash account (1137,000*12%*6/12)		68,220
	(for interest expense)
c.	Bonds payable			11,37,000
	Gain n redemption of bonds			56,850
	Cash account				10,80,150
	(for redemption of bonds)