Question

tion of premium on the bonds E14-15 (L01, 2) (Entries for Redemption and Issuance of Bonds) Jason Day Company had bonds outstanding with a maturity value of $300,000. On April 30, 2017, when these bonds had an unamortized discount of $10,000, they were called in at 104. To pay for these bonds, Day had issued other bonds a month earlier bearing a lower interest rate. The newly issued bonds had a life of 10 years. The new bonds were issued at 103 (face value $300,000) Instructions Ignoring interest, compute the gain or loss and record this refunding transaction (AICPA adapted)

Answer 1

Answer:

Calculation of Loss on Redemption of Bonds.

Reacquisition cost ($300,000 * 104%)	$312,000
Add : Unamortized discount bonds	$10,000
Less : Face value of the bonds	($300,000)
Loss on Redemption of Bonds	$22,000

Journal Entries

Account Titles & Explanation	Debit	Credit
Bonds Payable	300,000
Loss on Redemption of Bonds	22,000
Discount on Bonds Payable		10,000
Cash		312,000
(To record redemption of bonds payable)
Cash ($300,000 * 103%)	309,000
Premium on Bonds Payable		9,000
Bonds Payable		300,000
(To record issue of bonds payable)