On June 30, 2012, Cheyenne Company issued 12% bonds with a par value of $770,000 due in 20 years. They were issued at 98 and were callable at 103 at any date after June 30, 2020. Because of lower interest rates and a significant change in the company's credit rating, it was decided to call the entire issue on June 30, 2021, and to issue new bonds. New 10% bonds were sold in the amount of $1,000,000 at 102; they mature in 20 years. Cheyenne Company uses straight-line amortization. Interest payment dates are December 31 and June 30. (a) Prepare journal entries to record the redemption of the old issue and the sale of the new issue on June 30, 2021. (b) Prepare the entry required on December 31, 2021, to record the payment of the first 6 months' interest and the amortization of premium on the bonds. (Round answers to O decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Date (a) (b) June 30, 2021 June 30, 2021 Dec. 31, 2021 Account Titles and Explanation Bonds Payable Loss on Redemption of Bonds Discount on Bonds Payable Cash (To record the redemption of the old issue) Cash Premium on Bonds Payable Bonds Payable (To record the sale of the new issue) Interest Expense Premium on Bonds Payable Cash Debit 770000
On June 30, 2012, Cheyenne Company issued 12% bonds with a par value of $770,000 due in 20 years. They were issued at 98 and were callable at 103 at any date after June 30, 2020. Because of lower interest rates and a significant change in the company's credit rating, it was decided to call the entire issue on June 30, 2021, and to issue new bonds. New 10% bonds were sold in the amount of $1,000,000 at 102; they mature in 20 years. Cheyenne Company uses straight-line amortization. Interest payment dates are December 31 and June 30. (a) Prepare journal entries to record the redemption of the old issue and the sale of the new issue on June 30, 2021. (b) Prepare the entry required on December 31, 2021, to record the payment of the first 6 months' interest and the amortization of premium on the bonds. (Round answers to O decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Date (a) (b) June 30, 2021 June 30, 2021 Dec. 31, 2021 Account Titles and Explanation Bonds Payable Loss on Redemption of Bonds Discount on Bonds Payable Cash (To record the redemption of the old issue) Cash Premium on Bonds Payable Bonds Payable (To record the sale of the new issue) Interest Expense Premium on Bonds Payable Cash Debit 770000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![On June 30, 2012, Cheyenne Company issued 12% bonds with a par value of $770,000 due in 20 years. They were issued at 98 and
were callable at 103 at any date after June 30, 2020. Because of lower interest rates and a significant change in the company's credit
rating, it was decided to call the entire issue on June 30, 2021, and to issue new bonds. New 10% bonds were sold in the amount of
$1,000,000 at 102; they mature in 20 years. Cheyenne Company uses straight-line amortization. Interest payment dates are
December 31 and June 30.
(a)
(b)
(Round answers to O decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.
Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
Prepare journal entries to record the redemption of the old issue and the sale of the new issue on June 30, 2021.
Prepare the entry required on December 31, 2021, to record the payment of the first 6 months' interest and the
amortization of premium on the bonds.
No. Date
(a)
(b)
June 30, 2021
June 30, 2021
Dec. 31, 2021
Bonds Payable
Loss on Redemption of Bonds
Discount on Bonds Payable
Cash
(To record the redemption of the old issue)
Cash
Premium on Bonds Payable
Bonds Payable
(To record the sale of the new issue)
Interest Expense
Premium on Bonds Payable
Cash
Debit
770000
[][]
Ci](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fee006ef8-2a32-4271-be73-e6ac49bfb465%2F26dc6cbf-b680-4443-aba4-bc791a97d089%2Fwoxo7dx_processed.png&w=3840&q=75)
Transcribed Image Text:On June 30, 2012, Cheyenne Company issued 12% bonds with a par value of $770,000 due in 20 years. They were issued at 98 and
were callable at 103 at any date after June 30, 2020. Because of lower interest rates and a significant change in the company's credit
rating, it was decided to call the entire issue on June 30, 2021, and to issue new bonds. New 10% bonds were sold in the amount of
$1,000,000 at 102; they mature in 20 years. Cheyenne Company uses straight-line amortization. Interest payment dates are
December 31 and June 30.
(a)
(b)
(Round answers to O decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.
Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
Prepare journal entries to record the redemption of the old issue and the sale of the new issue on June 30, 2021.
Prepare the entry required on December 31, 2021, to record the payment of the first 6 months' interest and the
amortization of premium on the bonds.
No. Date
(a)
(b)
June 30, 2021
June 30, 2021
Dec. 31, 2021
Bonds Payable
Loss on Redemption of Bonds
Discount on Bonds Payable
Cash
(To record the redemption of the old issue)
Cash
Premium on Bonds Payable
Bonds Payable
(To record the sale of the new issue)
Interest Expense
Premium on Bonds Payable
Cash
Debit
770000
[][]
Ci
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