Question

Please provide step by step solutions for learning purposes

Pharoah, Inc. had outstanding $5,770,000 of 12% bonds (interest payable July 31 and January 31) due in 10 years. On July 1, it issued $8,800,000 of 10%, 15-year bonds (interest payable July 1 and January 1) at 97. A portion of the proceeds was used to call the 12% bonds (with unamortized discount of $230,800) at 104 on August 1. Prepare the journal entries necessary to record issue of the new bonds and the refunding of 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.) Date Account Titles and Explanation Debit Credit July 1 (To record issuance of 10% bonds) August 1 (To record retirement of 12% bonds)

Answer 1

Based on the information available in the question , we can answer as follows:-

Requirement 1:-

July 1	Cash A/c Dr.($8,800,000 * 0.97)	8,536,000
	Discount on Bonds A/c Dr.	264,000
	To Bonds Payable A/c		8,800,000
	(To record the issue of bonds)

Requirement 2:-

Particulars	Amount	Amount
Bonds Payable A/c	5,770,000
Loss on Retirement of Bonds	461,600
To Discount on Bonds payable a/c		230,800
To Cash($5,770,000 * 1.04)		6,000,800
(To record the retirement on bonds)

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