Several years ago, Nicole Company issued bonds with a face value of $1,030,000 for $960,000. As a result of declining interest rates, the company has decided to call the bond at a call premium of 6 percent over par. The bonds have a current book value of $1,013,000. Record the retirement of the bonds, using a discount account.

Question

Cornelius

Business

2 August, 05:33

Several years ago, Nicole Company issued bonds with a face value of $1,030,000 for $960,000. As a result of declining interest rates, the company has decided to call the bond at a call premium of 6 percent over par. The bonds have a current book value of $1,013,000. Record the retirement of the bonds, using a discount account.

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Logan Hammond · Answer 1

Journal Entry

Explanation:

The Journal Entry is shown below:-

Bonds payable Dr, $1,030,000

Loss on retirement of bond Dr, $78,800

($1,091,800 - $1,013,000)

To discount on bond $17,000

To cash $1,091,800

($1,030,000 * 106%)

(Being retirement of the bonds is recorded)