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Alona [7]
3 years ago
5

Ajax, Inc., issued callable bonds with a par value of $1,000,000 that require the payment of a call premium of $10,000. The bond

s have a carrying value of $990,000. We call these bonds prior to maturity on September 30. Please explain the calculation and journal entry
Business
1 answer:
ivann1987 [24]3 years ago
7 0

Answer:

Explanation:

The journal entry is shown below:

On September 30

Bonds payable A/c Dr $1,000,000

Loss on bond retirement A/c Dr $20,000

          To Discount on Bond A/c  $10,000

          To Cash A/c $1,010,000

(Being the callable bond is recorded)

The computation is shown below:

For cash

= Par value of bond + Premium

= $1,000,000 + $10,000

= $1,010,000

For Loss, it would be

= $1,010,000 - $990,000

= $20,000

And, the remaining amount would be transferred to discount on bond

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