On September 30, 2012, Carla Vista Company issued 11% bonds with a par value of $430,000 due in 20 years. They were issued at 98 and were callable at 105 at any date after September 30, 2017. Because Carla Vista Company was able to obtain financing at lower rates, it decided to call the entire issue on September 30, 2018, and to issue new bonds. New 9% bonds were sold in the amount of $810,000 at 104; they mature in 20 years. Carla Vista Company uses straight-line amortization. Interest payment dates are March 31 and September 30.
On September 30, 2012, Carla Vista Company issued 11% bonds with a par value of $430,000 due in 20 years. They were issued at 98 and were callable at 105 at any date after September 30, 2017. Because Carla Vista Company was able to obtain financing at lower rates, it decided to call the entire issue on September 30, 2018, and to issue new bonds. New 9% bonds were sold in the amount of $810,000 at 104; they mature in 20 years. Carla Vista Company uses straight-line amortization. Interest payment dates are March 31 and September 30.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
Question
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Practice Exercise 14-03 (Part Level Submission)
On September 30, 2012, Carla Vista Company issued 11% bonds with a par value of $430,000 due in 20 years. They were issued at 98 and were callable at 105 at any date after September 30, 2017. Because Carla Vista Company was able to obtain financing at lower rates, it decided to call the entire issue on September 30, 2018, and to issue new bonds. New 9% bonds were sold in the amount of $810,000 at 104; they mature in 20 years. Carla Vista Company uses straight-line amortization. Interest payment dates are March 31 and September 30.
Transcribed Image Text:2 Your answer is partially correct. Try again.
Prepare journal entries to record the redemption of the old issue and the sale of the new issue on September 30, 2018. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If
no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation
Rectangular Snip
Debit
Credit
Bonds Payable
430000
Loss on Redemption of Bor
29670
Discount on Bonds Paya
8170
Cash
451500
(To record the redemption of old issue)
Interest Expense
17820
Premium on Bonds Payable
405
Interest Payable
18225
(To record the sale of new issue)
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