Question

Problem 14-15 Early extinguishment; effective interest [LO14-5 The long-term liability section of Twin Digital Corporation's balance sheet as of December 31, 2017, included 12% bonds having a face amount of $35 million and a remaining discount of $1 million. Disclosure notes indicate the bonds were issued to yield 14%. Interest expense is recorded at the effective interest rate and paid on January 1 and July 1 of each year. On July 1, 2018, Twin Digital retired the bonds at 104 ($36.4 million) before their scheduled maturity 1.&2. Prepare the necessary journal entries for Twin Digital on July 1, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollar.) Journal entry worksheet Debit July 01, 2018

Problem 14-15 Early extinguishment; effective interest [LO14-5) The long-term liability section of Twin Digital Corporation's balance sheet as of December 31, 2017, included 12% bonds having a face amount of $35 million and a remaining discount of $1 million. Disclosure notes indicate the bonds were issued to yield 14%. Interest expense is recorded at the effective interest rate and paid on January 1 and July 1 of each year. On July 1, 2018, Twin Digital retired the bonds at 104 ($36.4 million) before their scheduled maturity Required 1.& 2. Prepare the necessary journal entries for Twin Digital on July 1, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollar.) View transaction list Journal entry worksheet Record the redemption of the bonds. Date July 01, 2018

Answer 1

July-1-18	Interest expense	2,450,000		=35000000*14%/2
	Discount on bonds payable		350,000
	Cash		2,100,000	=35000000*12%/2
July-1-18	Bonds payable	35,000,000
	Loss on early extinguishment	2,050,000
	Discount on bonds payable		650000	=1000000-350000
	Cash		36,400,000