Question

Required information [The following information applies to the questions displayed below.) On January 1, 2021, Splash City issues $320,000 of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. The market interest rate on the issue date is 9% and the bonds issued at $293,938. 2. If the market interest rate drops to 7% on December 31, 2022, it will cost $347,025 to retire the bonds. Record the retirement of the bonds on December 31, 2022. (If no entry is required for a particular transaction/event, select "No Journal Entry Required in the first account field. Round your intermediate calculations to the nearest whole dollar amount.) View transaction list Journal entry worksheet Record the retirement of the bonds. Note: Enter debits before credits Date General Journal Debit Credit December 31 2022 Record entry Clear entry View general Journal

Answer 1

Answer:

Date	Account title and Explanation	Debit	Credit
December 31, 2022	Bonds payable	$320,000
	Loss on retirement of bonds	$52,233
	Discount on bonds payable (unamortized)		$25,208
	Cash		$347,025
	[To record retirement of bonds]

Calculations:

i. Unamortized discount:

At the time issuance of bonds:
Face value of the bonds	$320,000
(Less): Issue price of bonds	($293,938)
Total discount on bonds payable	$26,062
For year 2021:
Interest expense [293,938 x 9%]	$26,454
Interest paid [320,000 x 8%]	($25,600)
Discount amortized	$854
At Dec 31,2021:
Total discount on bonds payable	$26,062
(Less): Discount amortized	($854)
Unamortized discount	$25,208

ii.Loss on retirement of bonds:

Cash paid on retirement	$347,025
Unamortized discount on bonds payable	$25,208
Bonds payable	($320,000)
Loss on retirement of bonds	$52,233