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Hurst, Incorporated sold its 8% bonds with a maturity value of $4,500,000 on August 1, 2018...

Hurst, Incorporated sold its 8% bonds with a maturity value of $4,500,000 on August 1, 2018 for $4,419,000. At the time of the sale the bonds had 5 years until they reached maturity. Interest on the bonds is payable semiannually on August 1 and February 1. The bonds are called at a price of 103 on August 1, 2020. Assume the Hurst used straight-line amortization.

Prepare the journal entry to record the bond call

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Solution:

Journal Entries - Hurst
Date Particulars Debit Credit
1-Aug-20 Bond Payable Dr $4,500,000.00
Loss on retirement of bond Dr $183,600.00
      To Discount on bond payable ($81,000 - $81,000*2/5) $48,600.00
      To Cash $4,635,000.00
(To record early retirment of bond)
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