Question

Robin Corporation retires its $800000 face value bonds at 104 on January 1, following the payment of annual interest. The carrying value of the bonds at the redemption date is $829960.
Required:
A) The entry to record the redemption will include __________.
O a debit of $32000 to Premium on Bonds Payable.
O debit of $2040 to Loss on Bond Redemption.
O credit of $32040 to Premium on Bonds Payable.
O credit of $2040 to Loss on Bond Redemption.

Answer 1

Answer:

The correct option is debit of $2040 to Loss on Bond Redemption

Explanation:

The unamortized premium on the bonds at redemption date=carrying value-face value

carrying value is $829,960

face value is $800,000

unamortized premium=$829,960-$800,000=$29,960

cash paid on redemption=$800,000*104%=$832,000.00  

The appropriate entries would a credit to cash of $ 832,000 while face value is debit to bonds payable and also the unamortized premium is debited to premium on bonds payable

loss on retirement=$832,000-$829,960=$2040

The loss is debited to loss on bond redemption