AMC Entertainment, Inc., owns and operates 243 movie theaters with 1,617 screens in 22 states. The company

Question:

AMC Entertainment, Inc., owns and operates 243 movie theaters with 1,617 screens in 22 states. The company sold 11 7/8 percent bonds in the amount of $52,720,000 and used the cash proceeds to retire bonds with a coupon rate of 13.6 percent. At that time, the 13.6 percent bonds had a book value of $50,000,000.

Required:

1. Prepare the journal entry to record the early retirement of the 13.6 percent bonds.

2. How should AMC report any gain or loss on this transaction?

3. Why did the company issue new bonds in order to retire the old bonds?

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...