Answered Essay: On June 30, 2009, Martinez Company issued 12% bonds with a par value of $840,000 due in 20 years. They

On June 30, 2009, Martinez Company issued 12% bonds with a par value of $840,000 due in 20 years. They were issued at 98 and were callable at 104 at any date after June 30, 2017. Because of lower interest rates and a significant change in the company’s credit rating, it was decided to call the entire issue on June 30, 2018, and to issue new bonds. New 8% bonds were sold in the amount of $1,070,000 at 102; they mature in 20 years. Martinez Company uses straight-line amortization. Interest payment dates are December 31 and June 30.

(a) Prepare journal entries to record the redemption of the old issue and the sale of the new issue on June 30, 2018.
(b) Prepare the entry required on December 31, 2018, to record the payment of the first 6 months’ interest and the amortization of premium on 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.)

No. Account Titles and Explanation Debit Credit
(a)
(To record the redemption of the old issue)
(To record the sale of the new issue)
(b)

Expert Answer

 

Old issue :

Issue price :840000*98/100 =823200

Discount : 840000-823200= $ 16800

Amortisation per year : 16800/20 = $ 840 per year

Number of years expired till 30 june 2018:9 years

Discount amortised during the period : 840*9= 7560

Unamortised discount : 16800-7560= 9240

Date Account Debit credit
30 june 2018 Bond payable 840000
Loss on redemption of bond payable[873600+9240-840000] 42840
Discount on bond payable 9240
Cash [840000*104/100] 873600
[Being bond reedemed ]
30 june 2018 cash   [1070000*102/100] 1091400
Premium on bond payable 21400
Bond payable 1070000
[Being bond redeemed at premium]

b)

Date Account Debit credit
31 december 2018 Interest expense [42800-42265] 42265
Premium on bond payable 535
cash [1070000*.08*6/12] 42800
[being first semiannual interest paid]

*premium amortisation :21400/20= 1070 per year

amortisation per semiannual month : 1070/2= 535

Buy Essay
Calculate your paper price
Pages (550 words)
Approximate price: -

Help Me Write My Essay - Reasons:

Best Online Essay Writing Service

We strive to give our customers the best online essay writing experience. We Make sure essays are submitted on time and all the instructions are followed.

Our Writers are Experienced and Professional

Our essay writing service is founded on professional writers who are on stand by to help you any time.

Free Revision Fo all Essays

Sometimes you may require our writers to add on a point to make your essay as customised as possible, we will give you unlimited times to do this. And we will do it for free.

Timely Essay(s)

We understand the frustrations that comes with late essays and our writers are extra careful to not violate this term. Our support team is always engauging our writers to help you have your essay ahead of time.

Customised Essays &100% Confidential

Our Online writing Service has zero torelance for plagiarised papers. We have plagiarism checking tool that generate plagiarism reports just to make sure you are satisfied.

24/7 Customer Support

Our agents are ready to help you around the clock. Please feel free to reach out and enquire about anything.

Try it now!

Calculate the price of your order

Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

HOW OUR ONLINE ESSAY WRITING SERVICE WORKS

Let us write that nagging essay.

STEP 1

Submit Your Essay/Homework Instructions

By clicking on the "PLACE ORDER" button, tell us your requires. Be precise for an accurate customised essay. You may also upload any reading materials where applicable.

STEP 2

Pick A & Writer

Our ordering form will provide you with a list of writers and their feedbacks. At step 2, its time select a writer. Our online agents are on stand by to help you just in case.

STEP 3

Editing (OUR PART)

At this stage, our editor will go through your essay and make sure your writer did meet all the instructions.

STEP 4

Receive your Paper

After Editing, your paper will be sent to you via email.

× How can I help you?