Question

Mia Breen Corp. produces and sells wind-energy-driven engines. To finance its operations, Mia Breen issued $22,000,000 of 20-year, 4% 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 1 Issued the bonds for cash at their face amount. Nov. 1 Paid the interest on the bonds. 20Y9 Nov. 1 Called the bond issue at 97, 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.

Answer 1

Answer and Explanation:

The Journal entry is shown below:-

Cash Dr, $22,000,000

    To Bonds payable $22,000,000

(Being issuance of bonds is recorded)

2. Interest expenses Dr, $440,000

($22,000,000 × 4% × 6 ÷ 12)

    To cash $440,000

(Being payment of interest is recorded)

3. Bonds payable Dr, $22,000,000

     To Cash $21,560,000

      To Gain on Retirement on bonds, plug $440,000

(Being the retirement of bonds is recorded)