Emil Corp. produces and sells wind-energy-driven engines. To finance its operations, Emil Corp. issued $15,000,000 of 20-year, 9
% callable bonds on May 1, 20Y1, at their face amount, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year.
1 answer:
Answer and Explanation:
The Journal entry is shown below:-
1. Cash Dr, $15,000,000
To Bonds payable $15,000,000
(Being issue of bonds is recorded)
2. Interest expense on bonds Dr, $675,000
To cash $675,000 ($15,000,000 × 9% × 6 ÷ 12)
(Being payment of interest is recorded)
3. Bonds payable Dr, $15,000,000
To Gain on redemption of bonds $600,000
To Cash ($15,000,000 × 0.96) $14,400,000
(Being redemption on bonds is recorded)
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