Q8. On Jan. 1, 2010, General Bell Corporation issued at 97%, bonds with a par value...
Q8. On Jan. 1, 2010, General Bell Corporation issued at 97%, bonds with a par value of SR 800,000 due in 20 years. It incurred bond issue cost totaling SR 16,000. Eight years after the issue date, General Bells calls the entire issue at 101% and cancels it. Compute the loss on redemption (extinguishment).
Q.9. On Jan. 1, 2011, STC retired SR 500,000 of bonds at 99%. At the time of retirement, the unamortized premium was SR 15,000 and unamortized bond issue costs were SR 5,250. Prepare journal entries of reacquisition of bonds in the books of STC.
Homework Answers
Issue Proceeds = 800,000*0.97 = 776,000
Bond Issue cost of SR 16000 to be amortized over the period of
20 years.
Now Company retires the bond after 8 years, the issue cost couldn't
be amortized completely and the balance left is SR 9600.
The accounting entry to be made in this case,
| Bonds Payable | Dr | 800000 |
| Loss on Redemption of Bonds | Dr | 17600 |
| Cash | Cr | 808000 |
| Discount on Bonds Payable | Cr | 9600 |
Therefore, the loss incurred is SR 17,600.
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