Chen Company issued its 9%, 25-year mortgage bonds in the principal amount of 30,000,000 on January 2,

Question:

Chen Company issued its 9%, 25-year mortgage bonds in the principal amount of ¥30,000,000 on January 2, 2001, at a discount of

¥2,722,992 (effective rate of 10%). The indenture securing the issue provided that the bonds could be called for redemption in total but not in part at any time before maturity at 104% of the principal amount, but it did not provide for any sinking fund.

On December 18, 2015, the company issued its 11%, 20-year debenture bonds in the principal amount of ¥40,000,000 at 102, and the proceeds were used to redeem the 9%, 25-year mortgage bonds on January 2, 2016. The indenture securing the new issue did not provide for any sinking fund or for retirement before maturity. The unamortized discount at retirement was ¥1,842,888.

Instructions

(a) Prepare journal entries to record the issuance of the 11% bonds and the retirement of the 9%

bonds.

(b) Indicate the income statement treatment of the gain or loss from retirement and the note disclosure required.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Intermediate Accounting IFRS Edition

ISBN: 9781118443965

2nd Edition

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

Question Posted: