Answer and Explanation:
The Journal entry is shown below:-
1. Bond Payable Dr, $36,000
Loss on retirement of bond Dr, $8,000
To Cash $36,500
To Discount on bond payable $7,500
(Being early retirement of bond is recorded)
For recording the early retirement of bond we debited the Bond Payable as it decreasing the liability and Loss on retirement of bond as it is a loss and we credited the cash as it decreases and Discount on bond payable as it is a balancing figure.
2. Bond Payable Dr, $36,000
Premium on bond payable Dr, $1,000
To Cash $36,500
To Gain on retirement of bond $500
(Being early retirement of bond is recorded)
For recording the early retirement of bond we simply debited as it decreasing the liability and we credited the Gain on retirement of bond as it is a income.
