On September 30, 2014. Sky Company issued 8% bonds with a par value of A$500,000 due in 20 years. They were issued for A$414,207 to yield 10% and were callable at 104 at any date after September 30, 2021. Because of lower interest rates and a significant change in the company's credit rating, it was decided to call the entire issue on September 30, 2022, and to issue new bonds. New 6% bonds with a face amount of A$800,000 were sold for A$900,410 to yield 5%; they mature in 20 years. Interest payment dates are March 31 and September 30 for both the old and new bonds.
On September 30, 2014. Sky Company issued 8% bonds with a par value of A$500,000 due in 20 years. They were issued for A$414,207 to yield 10% and were callable at 104 at any date after September 30, 2021. Because of lower interest rates and a significant change in the company's credit rating, it was decided to call the entire issue on September 30, 2022, and to issue new bonds. New 6% bonds with a face amount of A$800,000 were sold for A$900,410 to yield 5%; they mature in 20 years. Interest payment dates are March 31 and September 30 for both the old and new bonds.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On September 30, 2014, Sky Company issued 8% bonds with a par value of A$500,000 due in 20 years. They were issued for
A$414,207 to yield 10% and were callable at 104 at any date after September 30, 2021. Because of lower interest rates and a
significant change in the company's credit rating, it was decided to call the entire issue on September 30, 2022, and to issue new
bonds. New 6% bonds with a face amount of A$800,000 were sold for A$900,410 to yield 5 %; they mature in 20 years. Interest
payment dates are March 31 and September 30 for both the old and new bonds.
(a)
Prepare journal entries to record the retirement of the old issue and the sale of the new issue on September 30, 2022.
Unamortized discount is A$65,816. (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 o for the amounts.)
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