Answer:
bonds payable 660,000 debit
loss on redemption 13,200 debit
cash 666,600 credit
discount on bonds payable 6,600 credit
Explanation:
discount at issuance:
face value 1,100,000
issued at 98: 1,078,000
discount 22,000
the discount is amortized with straight line method
discount at call date:
2017 - 2012 = 5 year
22,000 x 5/10 = 11,000 discount at Jan 2nd,2017
discount of 660,000 bonds at Jan 2nd,2017
1,100,000 --> 11,000
660,000 --> 6,600
carrying value 660,000 - 6,600 = 653,400
bonds are called at 101
660,000 x 101/100 = 666,600
loss on redemption:
653,400 - 666,600 = 13,200
