Question

For each independent situation below, prepare the appropriate journal entry for the retirement. a) Noble Corporation retired $130,000 face value, 12% bonds on June 30, 2018, at a price of 102. The carrying (book) value of the bonds at the retirement date was $107,500. The bonds pay semiannual interest and the interest payment due on June 30, 2018, has been made and recorded. b) Vargas, Inc. retired $150,000 face value, 12.5% bonds on June 30, 2018 at a price of 96. The carrying (book) value of the bonds at the redemption date was $151,000. The bonds pay semi-annual interest and the interest payment due on June 30, 2018, has been made and recorded.

Answer 1

Answer: kindly check Explanation

Explanation:

DISCOUNT:

Carrying value : 107,500

Face value: (130,000)

Discount : (22500)

PROFIT / LOSS:

Carrying value: 107,500

Retirement price : (132,600) [130,000 × 102]

Loss : (25,100)

June 30, 2018 Bonds payable 130,000

---------------------- Loss on retirement 25100

- - - - - - - - - - Discount on bond payable 22,500

- - - - - - - - - - - - - - - - - - - - - - Cash 132,600

Record redemption of bond at loss

B.) PREMIUM :

Carrying value : 151,000

Face value: (150,000)

Discount : 1000

CALCULATE PROFIT/LOSS:

Carrying value: 151,000

Retirement price : (147000) [150,000 × 98]

Profit : (4000)

June 30, 2018 Bonds payable 150,000

---------------------- Gain on redemption 4000

- - - - - - - - - - - - - - - premium on bond 1000

- - - - - - - - - - - - - - - - - - - - - - Cash 147,000

Record redemption of bond at gain