On April 1, 2022, Sarkar Sailboats sold 15,000 of its 11%, 15-year, R$1,000 face value bonds to yield 12%. Interest payment dates are April 1 and October 1. On April 2, 2023, Sarkar took advantage of favorable prices of its shares to extinguish 6,000 of the bonds by issuing 200,000 of its R$10 par value ordinary shares. At this time, the accrued interest was paid in cash. The company’s shares were selling for R$31 per share on April 2, 2023.

Instructions

Prepare the journal entries needed on the books of Sarkar to record the following.

a. April 1, 2022: issuance of the bonds.

b. October 1, 2022: payment of semiannual interest.

c. December 31, 2022: accrual of interest expense.

d. April 1, 2023: payment of semiannual interest.

e. April 2, 2023: extinguishment of 6,000 bonds. (No reversing entries made.)