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- Adele Corp., a wholesaler of music equipment, issued $22,000,000 of 20-year, 7% callable
bonds on March 1, 20Y1, at their face amount, with interest payable on March 1 and
erat September 1. The fiscal year of the company is the calendar year. Journalize the entries
to record the following selected transactions:
20Y1
Mar. 1. Issued the bonds for cash at their face amount.
Sept. 1. Paid the interest on the bonds.
2045
Sept. 1. Called the bond issue at 102, the rate provided in the bond indenture.
(Omit entry for payment of interest.)

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tutorAnne

Answer:Please see answer in explanation column

Explanation:

The Journal entry is shown below:-

1. To record the issue of bonds payable

Date        Account titles and explanation          Debit                    Credit

March 1 20Y1       Cash                                     $22,000,000  

          To Bonds payable                                                               $22,000,000  

2.To record Interest on the bonds paid  

Date        Account titles and explanation          Debit                    Credit

Sept 1  20Y1         Interest expense                      $770,000  

        Cash                                                                                         $770,000

Calculation:

Interest = face value of bonds x interest rate x time

=$22,000,000  x 7% x 6/12

=$770,000

 

3. To record bonds on retirement is recorded

 Date       Account titles and explanation          Debit                 Credit    

Sept 1 2045   Bonds payable                            $22,000,000  

   Loss on retirement of bonds                $440,000      

 To Cash                                                                                         $22,440,000

Calculation:

Cash = $22,000,000 × 102/ 100)  = 22,440,000

Loss on retirement of bonds =  $22,440,000 -  $22,000,000  = $440,000

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