Homework Answers
Answer:
To record the retirement we need prepare the amortization schedule upto Dec 31, 2022.
January 1, 2021:
Discount on bond = 450000 - 419422 = $30,578
June 30:
Interest expense = 419422 * 8%/2 = $16776.88
Cash payment = 450000 * 7%/2 = $15,750
Amortization of discount = 16776.88 - 15750 = $1026.88
Carrying value of bond = 419422 + 1026.88 = $420,448.88
Similarly we calculate for all semiannual periods upto Dec. 31, 2022 as follows:
Bond's carrying value as on Dec.31, 2022 = $423,782.61
Bonds are retired at = $450000
Hence:
Loss on bond retirement = 450000 - 423782.61 = $26,217.39
Journal entry on retirement:
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