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Current Attempt in Progress
On June 30, 2017, Indigo Company issued 12% bonds with a par value of $740,000 due in 20 years. They were issued at 98 and were
callable at 104 at any date after June 30, 2025. Because of lower interest rates and a significant change in the company's credit rating.
It was decided to call the entire issue on June 30, 2026, and to issue new bonds. New 10% bonds were sold in the amount of
$1,060,000 at 102, they mature in 20 years. Indigo Company uses straight-line amortization. Interest payment dates are December 31
and June 30.
(a) Prepare journal entries to record the redemption of the old issue and the sale of the new issue on June 30, 2026.
(b) Prepare the entry required on December 31, 2026, to record the payment of the first 6 months' interest and the
amortization of premium on the bonds.
(If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented
when the amount is entered. Do not indent manually. List all debit entries before credit entries.)
Date
Account Titles and Explanation
Debit
Credit
(To record the redemption of the old issue)
(To record the sale of the new issue)
