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.

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 2 years ago

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