Homework Answers
| Issue price of bond | $1,188,000 | 1200000*99% | |
| Discount on bond issue | $12,000 | 1200000-1188000 | |
| Discount amortized each semi-annually | 12000/20 | ||
| Discount amortized each semi-annually | $600 | ||
| Discount amortized till 31st Dec 2021 | $3,600 | 3*600*2 | |
| Discount amortized on 31st March 2022 | $300 | 600*(3/6) | |
| Total discount amortized | $3,900 | ||
| Discount on bonds payable balance (31.03.2022) | $8,100 | 12000-3900 | |
| Calculate recall price | |||
| Call price (1200000*108%) | $1,296,000 | ||
| Add: Accrued interest (1200000*7%*3/12) | $21,000 | ||
| Reacquisition price | $1,317,000 | ||
| Less: Book value of bond (1200000-8100) | $1,191,900 | ||
| Loss on redemption | $125,100 | ||
| Record journal entry for bond reacquired | |||
| General Journal | Debit | Credit | |
| Bonds payable | $1,200,000 | ||
| Loss on redemption of bond | $125,100 | ||
| Discount on bonds payable | $8,100 | ||
| Cash | $1,317,000 | ||
| (To record reacquisition of bonds) | |||
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