Question

The balance sheet for Gelher Company reports the following information on July 1, 2022. GELHER COMPANY Balance Sheet (partial) Long-term liabilities Bonds payable $2,000,000 Less: Discount on bonds payable 45,000 $1,955,000 Gelher decides to redeem these bonds at 102 after paying annual interest. Prepare the journal entry to record the redemption on July 1, 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit July 1 enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount

Answer 1

Answer:

Explanation:

The journal entry is shown below:

Bonds payable A/c Dr $2,000,000

Loss on early retirement on bonds A/c Dr $85,000

         To Cash A/c $2,040,000                           ($2,000,000 × 1.02)

         To Discount on bonds payable A/c $45,000

(Being the redemption of bond is recorded)

The loss on early retirement on bond is computed below:

= $2,040,000 - $1,955,000

= $85,000