Question

On January 1, 2015, Ayayai Industries Inc. issued a $1,018,000, 10-year bond. The bond sold at 97, and paid 13% interest each January 1 and July 1. Ayayai called at 103 and cancelled the bond on January 1, 2020. Assume the company used the straight-line method of amortization (21) Your answer is correct. Calculate the gain or loss on redemption. Loss on redemption of bond 45,810 i eTextbook and Media List of Accounts Attempts: 1 of 3 used (a2) Your answer is partially correct. Prepare the journal entry to record the early retirement of the bond. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts.) Date Account Titles and Explanation Debit Credit January 1 1.018.000 Bonds Payable Loss on Redemption of Bonds 45,810 Cash 1.063.810 eTextbook and Media List of Accounts Save for Later Attempts: 1 of 3 used Submit Answer

Answer 1

Account Titles and Explanation	Debit	Credit
Bonds payable	$ 1,018,000
Loss on redemption of bonds	$ 45,810
Discount on Bonds payable		$ 15,270
Cash		$ 1,048,540
(To record the early retirement of bond)
Workings :
Discount on issue of Bonds        = $ 1,018,000 (-) [ $ 1,018,000 x 97% )        = $ 1,018,000 (-) $ 987,460	$ 30,540
Amortized Discount         = ($ 30,540 / 10 Years ) x   Years	$ 15,270
Unamortized Discount	$ 15,270