Sunland, Inc. had outstanding $5,460,000 of 11% bonds (interest payable July 31 and January 31) due...

Sunland, Inc. had outstanding $5,460,000 of 11% bonds (interest payable July 31 and January 31) due in 10 years. On July 1, it issued $9,750,000 of 10%, 15-year bonds (interest payable July 1 and January 1) at 97. A portion of the proceeds was used to call the 11% bonds (with unamortized discount of $109,200) at 102 on August 1. Prepare the journal entries necessary to record issue of the new bonds and the refunding of the bonds.

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Expert Solution

Date	Account	Debit	Credit	Explanation
Jul.1	Cash	9,457,500		97% of face value
	Discount on bonds payable	292,500		3% of face value
	Bonds payable		9,750,000	Face value
	[Entry to record issue of bonds]


Aug.1	Interest expense	50,050		one month
	Bonds payable	5,460,000		Face value
	Discount on bonds payable		109,200	Unamortized value
	Cash		5,569,200	102% of face value
	Loss on redempion of bonds	168,350		Balancing amount

ekkarill92 answered 1 year ago

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