Answer:
Dr Bond Payable 2,100,000
Dr Loss on bond redemption 152,250
Cr Discount on bond 47,250
Cr Cash 2,205,000
(to record the redemption on bond as at Jul 1st 2022 at 105%)
Explanation:
As Bond redemption takes place, the Bond payable account ( which has the Credit side) and Discount on bonds payable ( which has the Debit side) should be fully lifted out of the Balance Sheet. Thus, we Debit Bond redemption by the recorded amount of $2,100,000 and Credit Discount on bonds at the recorded amount of $47,250.
The Cash paid out for bond redemption is 2,100,000 x 105% = $2,205,000 which is credited as cash decreases.
The difference between Debit and Credit side of the 03 entries described above ( 2,205,000 - 2,100,000 - 47,250 = 152,250) will be recorded as Debit to Loss on bond redemption account.
