Question

Several years ago, Nicole Company issued bonds with a face value of $1,030,000 for $960,000. As a result of declining interest rates, the company has decided to call the bond at a call premium of 6 percent over par. The bonds have a current book value of $1,013,000. Record the retirement of the bonds, using a discount account.

Answer 1

Answer:

Journal Entry

Explanation:

The Journal Entry is shown below:-

Bonds payable Dr,                      $1,030,000

Loss on retirement of bond Dr,       $78,800

($1,091,800 - $1,013,000)

          To discount on bond                      $17,000

          To cash                                            $1,091,800

($1,030,000 × 106%)

(Being retirement of the bonds is recorded)