Polders Corp., a wholesaler of office equipment, issued $40,000,000 of 10-year, 8% callable bonds on April 1, 2014

Polders Corp., a wholesaler of office equipment, issued $40,000,000 of 10-year, 8% callable bonds on April 1, 2014, with interest payable on April 1 and October 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions:

2014

Apr. 1. Issued the bonds for cash at their face amount.

Oct. 1. Paid the interest on the bonds.

2018

Oct. 1. Called the bond issue at 104, the rate provided in the bond indenture. (Omit entry for payment of interest.)


Answer:

2014
Apr. 1 Cash 40,000,000
Bonds Payable 40,000,000
Oct. 1 Interest Expense 1,600,000
Cash 1,600,000
2018
Oct. 1 Bonds Payable 40,000,000
Loss on Redemption of Bonds 1,600,000
Cash* 41,600,000
* $40,000,000 × 1.04