On January $1,2018,$ Blossom Ltd$.$ issued $2,500,000$ of $5-$year, $5\%$ bonds at $95.$ The bonds pay interest annually on January $1.$ By

January $1,2020,$ the market rate of interest for bonds of risk similar to those of Blossom Ltd$.$ had risen. As a result, the market value of

these bonds was $2,000,000$ on January $1,2020-$below their carrying value. Debra Blossom, president of the company, suggests

repurchasing all of these bonds in the open market at the $2,000,000$ price. To do so$,$ the company will have to issue $2,000,000($face

value$)$ of new $10-$year, $10\%$ bonds at par. The president asks you, as controller, "What is the feasibility of my proposed repurchase

plan?"

Answer the following.

$($a$)$

What is the carrying value of the outstanding Blossom Corporation $5-$year bonds on January $1,2020?($Assume straight$-$line

amortization.$)$

Carrying value of bonds $,$Prepare the journal entry to redeem the $5-$year bonds on January $1,2020.$ Prepare the journal entry to issue the new $10-$year

bonds. $($Credit account titles are automatically indented when the amount is entered. Do not indent manually.$)$

No$.$ Account Titles and Explanation

Debit

Credit

$($To record redemption of bonds$)$

$($To record sale of bonds at par$)$