Ask Question
22 June, 08:09

Several years ago, Cyclop Company issued bonds with a face value of $1,000,000 for $1,045,000. As a result of declining interest rates, the company has decided to call the bonds at a call premium of 5 percent over par. The bonds have a current book value of $1,010,000. Record the retirement of the bonds, using a premium account.

+1
Answers (1)
  1. 22 June, 08:31
    0
    The Journal entry is as follows:

    Retirement of Bond is recorded as shown below:

    Bonds payable A/c Dr. $1,000,000

    Premium on bonds A/c Dr. $10,000

    Loss on retirement of bonds A/c Dr. $40,000

    To cash A/c $1,050,000

    (For bonds retired)

    Workings:

    Premium on bonds:

    = Current book value - Face value

    = $1,010,000 - $1,000,000

    = $10,000

    cash = Face value + premium of 5 percent over par

    = $1,000,000 + ($1,000,000 * 0.05)

    = $1,000,000 + $50,000

    = $1,050,000
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Several years ago, Cyclop Company issued bonds with a face value of $1,000,000 for $1,045,000. As a result of declining interest rates, the ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers