Question

The following are independent situations. 1. Concord Corporation redeemed $135,300 face value, 12% bonds on June 30, 2020, at 109. The carrying value of the bonds at the redemption date was $120,300. The bonds pay annual interest, and the interest payment due on June 30, 2020, has been made and recorded. 2. Ivanhoe Company redeemed $147,000 face value, 15% bonds on June 30, 2020, at 93. The carrying value of the bonds at the redemption date was $149,000. The bonds pay annual interest, and the interest payment due on June 30, 2020, has been made and recorded. For each independent situation above, prepare the appropriate journal entry for the redemption or conversion of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Date Account Titles and Explanation Debit Credit 1. June 30 2. June 30

Answer 1

1.
Journal

Date	Account title	Debit	Credit
	Bonds payable	135,300
	Loss on bonds redemption	27,177
	Discount on bonds payable		15,000
	Cash		147,477

Carrying value of bonds = $120,300

Carrying value of bonds = Face value of the bonds - unamortized bond discount at the redemption date.

120,300 = 135,300 - unamortized bond discount at the redemption date

unamortized bond discount at the redemption date = $15,000

Redemption price of bonds = 135,300 x 109%

= $147,477

Loss on bonds redemption = Redemption price – Carrying value of bonds

= 147,477 - 120,300

= $27,177

2.

Journal

Date	Account title	Debit	Credit
June 30	Bonds payable	147,000
	Premium on bonds payable	2,000
	Cash		136,710
	Gain on bonds redemption		12,290

Carrying value of bonds = Face value of the bonds + unamortized bond premium at the redemption date.

149,000 = 147,000 + unamortized bond premium at the redemption date

Unamortized bond premium at the redemption date = $2,000

Redemption price of bonds = 147,000 x 93%

= $136,710

Gain on bonds redemption = Carrying value of bonds - Redemption price of bonds

= 149,000 - 136,710

= $12,290

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