The situations presented here are independent of each other. For each situation, prepare the appropriate journal entry for the redemption of the bonds. Pelfer Corporation redeemed $160,000 face value, 10% bonds on April 30, 2014, at 105. The carrying value of the bonds at the redemption date was $144,571. The bonds pay annual interest, and the interest payment due on April 30, 2014, has been made and recorded. 2-Youngman, Inc., redeemed $250,400 face value, 14.3% bonds on June 30, 2014, at 96. The carrying value of the bonds at the redemption date was $271,021. The bonds pay annual interest, and the interest payment due on June 30, 2014, has been made and recorded.

Question

Wesley Frost

Business

21 October, 15:26

The situations presented here are independent of each other. For each situation, prepare the appropriate journal entry for the redemption of the bonds. Pelfer Corporation redeemed $160,000 face value, 10% bonds on April 30, 2014, at 105. The carrying value of the bonds at the redemption date was $144,571. The bonds pay annual interest, and the interest payment due on April 30, 2014, has been made and recorded. 2-Youngman, Inc., redeemed $250,400 face value, 14.3% bonds on June 30, 2014, at 96. The carrying value of the bonds at the redemption date was $271,021. The bonds pay annual interest, and the interest payment due on June 30, 2014, has been made and recorded.

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Ellison · Answer 1

Answer and Explanation:

The Journal entry is shown below:-

1. Bonds payable Dr, $160,000

Loss on bond redemption Dr, $23,429

($160,000 * 1.05 - $144,571)

To Discount on bond payable $15,429

($160,000 - $144,571)

To Cash $168,000

($160,000 : 100 * 105)

(Being redemption of bonds is recorded)

2. Bonds payable Dr, $250,400

Premium on bond payable Dr, $20,621

($271,021 - $240,384)

To Gain on bond redemption $30,637

($271,021 - $240,384)

To Cash $240,384

($240,384 : 100 * 96)

(Being redemption on bonds is recorded)