Question

The balance sheet of Indian River Electronics Corporation as of December 31, 2017, included 12.5% bonds having a face amount of $90.1 million. The bonds had been issued in 2010 and had a remaining discount of $3.1 million at December 31, 2017. On January 1, 2018, Indian River Electronics called the bonds before their scheduled maturity at the call price of 103. Required: Prepare the journal entry by Indian River Electronics to record the redemption of the bonds at January 1, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.) View transaction list Journal entry worksheet < 1 > Record the redemption of the bonds. Note: Enter debits before credits. Debit Credit 90,100.000 Date General Journal January 01, 2018 Bonds payable Loss on early extinguishment Discount on bonds payable Cash 3.100.000 Record entry Clear entry View general journal

Answer 1

Face value of bonds = $90,100,000

Unamortized bond discount = $3,100,000

carrying value of bonds = Face value of bonds - Unamortized bond discount

= 90,100,000 - 3,100,000

= $87,000,000

Call price = 103

Cash paid to retire bonds = Face value of bonds x Call price

= 90,100,000 x 103%

= $92,803,000

Loss on retirement of bonds = Cash paid to retire bonds - carrying value of bonds

= 92,803,000 - 87,000,000

= $5,803,000

Journal

Date	Account Title and Explanation	Debit	Credit
jan 1, 2018	Bonds payable	90,100,000
	Loss on retirement of bonds	5,803,000
	Discount on bonds payable		3,100,000
	Cash		92,803,000
	(To record retirement of bonds)