ACC 304 All Assignments ACC 304 All Assignments | Page 235
7) Holiday Company issued its 7%, 25-year mortgage bonds in the
principal amount of $3,019,000 on January 2, 2000, at a discount of
$158,000, 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 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, but it did not provide for any sinking fund.
On December 18, 2014, the company issued its 11%, 20-year debenture
bonds in the principal amount of $4,277,000 at 101, and the proceeds
were used to redeem the 7%, 25-year mortgage bonds on January 2,
2015. The indenture securing the new issue did not provide for any
sinking fund or for redemption before maturity.
(a) Prepare journal entries to record the issuance of (1) the 11% bonds
and (2) the redemption of the 7% 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 amount is entered. Do
not indent manually.)
8) Under IFRS, bond issuance costs, including the printing costs and
legal fees associated with the issuance, should be:
expensed in the period when the debt is issued.