Answer:
<u>Redemption of Old Bonds</u>
4-30-17 Bonds Payable $311000 Dr
Loss on Bond Redemption $26550 Dr
Discount on Bonds Payable $11000 Cr
Cash $326550 Cr
<u>Issuance of New Bonds</u>
3-30-17 Cash $314110 Dr
Premium on Bonds Payable $3110 Cr
Bonds Payable $311000 Cr
Explanation:
<u>Redemption of Bonds Payable</u>
The maturity value for bonds payable is equal to the face value of these bonds. This means that the face value of old bonds was $311000.
The bonds were carrying a discount. Thus, the carrying value of bonds was
Carrying value = Face value - Discount
Carrying value = 311000 - 11000 = $300000
Bonds with a carrying value of $300000 were redeemed at 105% of the face value. The cash paid for redemption is,
Cash paid = 311000 * 105% = 326550
Thus, there was a loss on redemption of = 326550 - 300000 = $26550
<u />
<u />
<u>Issuance of Bonds Payable</u>
The bonds were issued at 101% of the face value which means they were issued at a premium.
The amount of premium on these bonds is,
Premium = Carrying value - Face value
Premium = 311000 * 101% - 311000
Premium = $3110
