A Company issued its 9%, 25-year mortgage bonds in the principal amount of $ 30,000,000 on January 2, 1996, at a discount of $ 2,722,992 (effective rate of 10%). The indenture securing the issue provided that the bonds could be called for redemption in total but not in part at any time before maturity at 104% of the principal amount.
On December 18, 2010, the company issued its 11%, 20-year debenture bonds in the principal amount of $ 40,000,000 at 102, and the proceeds were used to redeem the 9%, 25-year mortgage bonds on January 2, 2011. The unamortized discount at retirement was $1,842,888.
Help required in solving the following questions
(a) Prepare journal entries to record the issuance of the 11% bonds and the retirement of the 9% bonds.
(b) Indicate the income statement treatment of the gain or loss from retirement and the note disclo¬sure required.
On December 18, 2010, the company issued its 11%, 20-year debenture bonds in the principal amount of $ 40,000,000 at 102, and the proceeds were used to redeem the 9%, 25-year mortgage bonds on January 2, 2011. The unamortized discount at retirement was $1,842,888.
Help required in solving the following questions
(a) Prepare journal entries to record the issuance of the 11% bonds and the retirement of the 9% bonds.
(b) Indicate the income statement treatment of the gain or loss from retirement and the note disclo¬sure required.