Prepare the journal entry to record the following bond retirement. The December 31, 2018 balance sheet...
Prepare the journal entry to record the following bond retirement. The December 31, 2018 balance sheet of Wolfe Co. included the following items: 7.5% bonds payable due December 31, 2026 $3,000,000 Unamortized discount on bonds payable 120,000 The bonds were issued on December 31, 2016 at 95, with interest payable on June 30 and December 31. On January 1, 2019, Wolfe retired the entire bond issuance of $3,000,000 of these bonds at 101.
Homework Answers
Par value of bonds = $3,000,000
Unamortized discount on bonds payable = $120,000
retirement price = 101
cash paid to retire bonds = Par value of bonds x retirement price
= 3,000,000 x 101%
= $3,030,000
carrying value of bonds = Par value of bonds - Unamortized discount on bonds payable
= 3,000,000 - 120,000
= $2,880,000
Loss on bond retirement = cash paid to retire bonds - carrying value of bonds
= 3,030,000 - 2,880,000
= $150,000
Journal
|
Date |
Account Title and Explanation |
Debit |
Credit |
| Jan 1, 2019 | Bonds payable | 3,000,000 | |
| Loss on bond retirement | 150,000 | ||
| Unamortized discount on bonds payable | 120,000 | ||
| Cash | 3,030,000 | ||
| (To record retirement of bonds) |
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