The long-term liability section of Twin Digital Corporation’s balance sheet as of December 31, 2017, included...

The long-term liability section of Twin Digital Corporation’s balance sheet as of December 31, 2017, included 10% bonds having a face amount of $50 million and a remaining discount of $1 million. Disclosure notes indicate the bonds were issued to yield 12%. Interest expense is recorded at the effective interest rate and paid on January 1 and July 1 of each year. On July 1, 2018, Twin Digital retired the bonds at 103 ($51.5 million) before their scheduled maturity. Required: 1. & 2. Prepare the necessary journal entries for Twin Digital on July 1, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollar.)

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Expert Solution

Part 1: Prepare the journal entry by Twin Digital to record the semiannual interest on July 1, 2018.

General Journal	Debit	Credit
Interest Expense (12%49,000,0006/12)	$ 2,940,000
Discount on Bonds Payable		$ 440,000
Cash (10%500000006/12)		$ 2,500,000

Part 2: Prepare the journal entry by Twin Digital to record the redemption of the bonds on July 1, 2018

General Journal	Debit	Credit
Bonds Payable	$ 50,000,000
Loss on early extinguishment	$ 2,060,000
Discount on Bonds Payable (1,000,000 – 440,000)		$ 560,000
Cash (50,000,000 x 103%)		$ 51,500,000

ekkarill92 answered 4 weeks ago

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