On January 2, 2015, Concord Corporation issued $1,700,000 of 10% bonds at 97 due December 31,...
On January 2, 2015, Concord Corporation issued $1,700,000 of 10%
bonds at 97 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, Concord called $1,020,000 face amount of the
bonds and redeemed them.
Ignoring income taxes, compute the amount of loss, if any, to be
recognized by Concord as a result of retiring the $1,020,000 of
bonds in 2020. (Round answer to 0 decimal places, e.g.
38,548.)
1.)
| Loss on redemption |
2.) Prepare the journal entry to record the redemption.
Homework Answers
Discount on bonds 1020000 = 1020000*.03 = 30600
Unamortied discount = 30600*5/10 = 15300
1) Carrying amount of bonds = 1020000-15300 = 1004700
Loss on redemption = (1020000*1.02)-1004700 =35700
2) Journal entry
| Date | account and explanation | Debit | Credit |
| Bonds payable | 1020000 | ||
| Loss on redemption | 35700 | ||
| Discount on bonds payable | 15300 | ||
| Cash | 1040400 | ||
| (To record redemption) |
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