Question

Sheridan Company issued its 7% 25-year mortgage bonds in the principal amount of $3,140,000 on January 2, 2003, at a discount of $149,000, which it proceeded to amortize by charges to expense over the life of the issue on a straight-line basis. The indenture securing the issue provided the bonds could be called for redemption in total but not in part at any time before maturity at 106% of the principal amount, but it did not de for any sinking fund. On December 18, 2017, the company issued its 11%, 20-year debenture bonds in the principal amount of $3,980,000 at 101, and the proceeds were used to redeem the 7% 25-year mortgage bonds on January 2, 2018. The indenture secunng the new issue did not provide for any sinkin fund or for redemption before maturity. (a) Prepare journal entries to record the issuance of (i) the 11% bonds and (2) the redemption ofthe 7% bonds. (rno entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically Do not indent manually.) No. DateAccount Titles and Explanation Debit Credit (1) December 18, 2017 (2) January 2, 2018 No. Date Account Titles and Explanation Debit Credit (1) December 18, 2017 (2) January 2, 2018 (b) Indicate the income statement treatment of the gain or loss from redemption. is reported as The Click if you would like to Show Work for this question: Open Show Work Qu your instr estion At LATE

Answer 1

The answer for above problem is explained below.

entr DebitCredit Parhculas No Date 4019 800 Det, 18 3,980,000 člol % 1么 39 800 Payable 401,800 - 3980,00o] 11% Bous pa,table る980,000 [To secood isssonce of 11% bonda at premium a018, | 7% bondS Pa dole (2) 2018, 3 146, ood Janua1y 9 LOSS ơn edemption of 48,000 bonds 3328400+5 59,600) 一($ 3,140,000)

Cas 33 28 40o 140,000 106% Discount on, 7% 9,600 bonds poyable Ref NoTe band Band discount at the time of 1 49,000 iMued, Discoumt amoshied Pes yeor 5960 149, 000 25 Yeats t Jon 2ols 5 YeaTs 80,400

Un amostied balance o00 89, 400 委149,000一串89, 400 59, 600 s Theos oxtcol