Question

Grouper Co. is building a new hockey arena at a cost of $2,510,000. It received a downpayment of $490,000 from local businesses to support the project, and now needs to borrow $2,020,000 to complete the project. It therefore decides to issue $2,020,000 of 10%, 10-year bonds. These bonds were issued on January 1, 2019, and pay interest annually on each January 1. The bonds yield 9%.

Assume that on July 1, 2022, Grouper Co. redeems half of the bonds at a cost of $1,079,300 plus accrued interest. Prepare the journal entry to record this redemption. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
July 1, 2022
	(To record interest)
July 1, 2022
	(To record reacquisition)

Answer 1

July 1, 2022

Interest Account..........Debit $50500

        To Accrued Interest Account               $50500

(Being Interest for 6 months transfered to accrued interest)

(10,10000 * 10% *6/12)

July 1, 2022

10% Bonds Account ..........Debit $10,10000

Loss on redemption Account Debit $ 18800

               To Bonds Payable Account            $1028800

(Being amount due for bonds payable)

Calculation of amount of bonds payable

Total amount due including interest = $ 1079300

less: Accrued interest                          $(50500)

                                                            $1028800

Because half amount of bond payble is redeemed , so nominal value of bonds redeemable is $20,20000/2 = $10,10000

Loss is balancing figure of debit and credit