On January 1, 2020, Sage Hill Corporation issued $2,670,000, 5-year, 8% bonds at 97. The bonds pay interest annually on

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On January 1, 2020, Sage Hill Corporation issued
$2,670,000, 5-year, 8% bonds at 97. The bonds pay
interest annually on January 1. By January 1, 2022, the market rate
of interest for bonds of risk similar to those of Sage
Hill Corporation had risen. As a result, the market price of
these bonds was $2,225,000 on January 1, 2022—below their
carrying value of $2,621,940.

Geoff Marquis, president of the company, suggests repurchasing all
of these bonds in the open market at the $2,225,000 price. But
to do so the company will have to issue $2,225,000 (face
value) of new 10-year, 12% bonds at par. The president
asks you, as controller, “What is the feasibility of my proposed
repurchase plan?”

Answer the following.

(a)

Prepare the journal entry to redeem the 5-year bonds on January 1,
2022. (Credit account titles are automatically
indented when the amount is entered. Do not indent
manually.)
Account Titles and Explanation
Debit
Credit
enter an account title
enter a debit amount
enter a credit amount
enter an account title
enter a debit amount
enter a credit amount
enter an account title
enter a debit amount
enter a credit amount
enter an account title
enter a debit amount
enter a credit amount
Prepare the journal entry to issue the new 10-year
bonds. (Credit account titles are automatically
indented when the amount is entered. Do not indent
manually.)
Account Titles and Explanation
Debit
Credit
enter an account title
enter a debit amount
enter a credit amount
enter an account title
enter a debit amount
enter a credit amount