Question

Culver, 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. (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
	(To record issuance of 10% bonds)
August 1
	(To record retirement of 11% bonds)

Answer 1

Answer
Journal entry
Date	Account Titles and Explanations	Debit	Credit
Jul.1	Cash (97% of face value)	$       94,57,500
	Discount on bonds payable (3% of face value)	$         2,92,500
	Bonds payable		$      97,50,000
	(To record entry to record issue of bonds)
Aug.1	Interest expense (one month)	$            50,050
	Bonds payable	$       54,60,000
	Discount on bonds payable		$        1,09,200
	Cash (102% of face value)		$      55,69,200
	Loss on redemption of bonds	$         1,68,350
	(To record refunding)

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