Question
Cancellation of Bonds before maturity On January 1, 2011, Empresas Buenapaga issued callable bonds payable for a par value of $1,000,000. The bonds matured in
Cancellation of Bonds before maturity
On January 1, 2011, Empresas Buenapaga issued callable bonds payable for a par value of $1,000,000. The bonds matured in 20 years. The contract interest rate is 9% payable semi-annually on June 30 and December 31. As the market rate on similar bonds was at 8%, the bonds were sold at premium at $1,250,000. The bonds had a call price of 105%.
Buenapaga has obtained financing at a lower interest rate and decides to redeem the bonds by paying the redemption price on July 30, 2022 when the premium has an outstanding unrepaid balance of $75,000.
Required: Make the journal payment to register the cancellation of the bonus on July 30, 2022. Remember to determine the redemption price of the bond and the value of the outstanding debt (carrying value)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started