On September 30, 2009, Sage Company issued 12% bonds with a par value of $750,000 due in
Question:
On September 30, 2009, Sage Company issued 12% bonds with a par value of $750,000 due in 20 years. They were issued at 98 and were callable at 104 at any date after September 30, 2017. Because of lower interest rates and a significant change in the company’s credit rating, it was decided to call the entire issue on September 30, 2018, and to issue new bonds. New 8% bonds were sold in the amount of $1,020,000 at 101; they mature in 20 years. Sage Company uses straight-line amortization. Interest payment dates are December 31 and September 30.
(a) | Prepare journal entries to record the redemption of the old issue and the sale of the new issue on September 30, 2018. | |
(b) | Prepare the entry required on December 31, 2018, to record the payment of the first 6 months’ interest and the amortization of premium on 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.)
a).
Bonds payable 750,000
loss on redemption of bonds ?
cash ?
discount on bonds payable ?
(to record the redemption of the old issue)
cash 1030200
prem. on bonds payable 10200
bonds payable 1020000
( to record the sale of the new issue)
b). Interest expense ?
premium on bonds payable 255
cash ?
Investment Analysis and Portfolio Management
ISBN: 978-0538482387
10th Edition
Authors: Frank K. Reilly, Keith C. Brown