On January 2, 2015, Shamrock Corporation issued $1,350,000 of 10% bonds at 99 due December 31,...
On January 2, 2015, Shamrock Corporation issued $1,350,000 of 10% bonds at 99 due December 31, 2024. Interest on the bonds is payable annually each December 31. The discount on the bonds is also being amortized on a straight-line basis over the 10 years. (Straight-line is not materially different in effect from the preferable “interest method.”) The bonds are callable at 102 (i.e., at 102% of face amount), and on January 2, 2020, Shamrock called $810,000 face amount of the bonds and redeemed them. Ignoring income taxes, compute the amount of loss, if any, to be recognized by Shamrock as a result of retiring the $810,000 of bonds in 2020. (Round answer to 0 decimal places, e.g. 38,548.)
Loss on redemption= _____
Prepare the journal entry to record the redemption.
Homework Answers
| Discount on issue | 13500 | =1350000*(1-0.99) | |
| Discount unamortized | 6750 | =13500*5/10 | |
| Discount unamortized relating to bonds redeemed | 4050 | =6750*810000/1350000 | |
| Carrying value of bonds redeemed | 805950 | =810000-4050 | |
| Redemption price | 826200 | =810000*1.02 | |
| Less: Carrying value of bonds redeemed | 805950 | ||
| Loss on redemption | 20250 |
| Date | Account Titles and Explanation | Debit | Credit | |
| January 2, 2020 | Bonds payable | 810000 | ||
| Loss on redemption of bonds | 20250 | |||
| Discount on Bonds payable | 4050 | |||
| Cash | 826200 | =810000*1.02 |
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