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Recording the Refunding of Long - Term Debt On January 1 of Year 1 , Rocket Corporation issued $ 2 5 0 , 0 0

Recording the Refunding of Long-Term Debt
On January 1 of Year 1, Rocket Corporation issued $250,000 of 6%,20-year bonds at 98. The interest is payable each December 31. Rocket uses straight-line amortization. The companys accounting period ends December 31. On January 1 of Year 10, Rocket issued $250,000,5%20-year bonds at par; it then immediately purchased all of the 6% bonds. On this date, the 6% bonds could be purchased in the open market at 102.
a. Provide the entry for issuance of the 6% bonds on January 1 of Year 1.
b. Provide the entry for issuance of the 5% bonds on January 1 of Year 10.
c. Provide the entry to record the extinguishment of the 6% bonds on January 1 of Year 10.
Date Account Name Dr. Cr.
a. Jan. 1, Year 1
Cash
0
0
Answer 1
Discount on Bonds Payable
0
0
Answer 2
Bonds Payable
0
0
Answer 3
To record the issuance of bonds.
b. Jan. 1, Year 10
Cash
250,000
0
Answer 4
Bonds Payable
0
250,000
Answer 5
To record the issuance of bonds.
c. Jan. 1, Year 10
Bonds Payable
0
0
Answer 6
Loss on Redemption of Bonds
0
0
Answer 7
0
0
Answer 8
0
0
Answer 9
To record the extinguishment of bonds.

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