Tyrell Company issued callable bonds with a par value of $10,000. The call option requires Tyrell to pay a call premium of $500 plus par (or a total of $10,500) to bondholders to retire the bonds. On July 1, Tyrell exercises the call option. The call option is exercised after the semiannual interest is paid the day before on June 30. Record the entry to retire the bonds under each separate situation.

(1) The bonds have a carrying value of $9,000.

(2) The bonds have a carrying value of $11,000.

Question

Derick Barton

Business

23 January, 16:52

Tyrell Company issued callable bonds with a par value of $10,000. The call option requires Tyrell to pay a call premium of $500 plus par (or a total of $10,500) to bondholders to retire the bonds. On July 1, Tyrell exercises the call option. The call option is exercised after the semiannual interest is paid the day before on June 30. Record the entry to retire the bonds under each separate situation.

(1) The bonds have a carrying value of $9,000.

(2) The bonds have a carrying value of $11,000.

+1

Answers (1)

Know the Answer?

Trevor Dominguez · Answer 1

Tyrell company

Journal entries

Jul-01

Dr Bonds Payable $10000

Dr Loss on retirement $1,500

Cr Discount on Bonds Payable [10000 - 9000] $1,000

Cr Cash [10000 + 500] $10,500

Jul-01

Dr Bonds Payable $10,000

Dr Premium on Bonds Payable [11000 - 10000] $1,000

Cr Gain on retirement of bonds $500

Cr Cash [10000 + 500] $10,500