Question

Ayayai Company had bonds outstanding with a maturity value of $ 313,000. On April 30, 2017,when these bonds had an unamortized discount of $ 9,000, they were called in at 104. To pay for these bonds, Ayayai had issued other bonds a month earlier bearing a lower interest rate. The newly issued bonds had a life of 10 years. The new bonds were issued at 102 (face value $ 313,000) lgnoring interest, compute the gain or loss. Loss on redemption Ignoring interest, record this refunding transaction. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit (To record redemption of bonds payable) (To record issuance of new bonds)

Answer 1

Calculate gain or loss on redemption :

Gain on loss on redemption = Cash paid for bond redemption - bond book value

= (313000*1.04)-(313000-9000)

Loss on redemption of bonds = $21520

Journal entry

Date	account and explanation	debit	credit
	Bonds payable	313000
	Loss on redemption of bonds	21520
	Discount on bonds payable		9000
	Cash (313000*1.04)		325520
	(To record redemption of bonds payable)
	Cash	319260
	Bonds payable		313000
	Premium on bonds payable		6260
	(To record issuance of new bonds)