Question

Marin, Inc. redeemed $159,000 face value, 13.5% bonds on June 30, 2022, at 95. The carrying value of the bonds at the redemption date was $171,720. The bonds pay annual interest, and the interest payment due on June 30, 2022, has been made and recorded. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Required:
Prepare the appropriate journal entry for the redemption orconversion of the bonds.

Answer 1

Answer:

The journal entry is given below:

Explanation:

According to the scenario, the computation for the given data are as follows:

Bonds payable premium = Carrying value - Face value

= $171720 -$159,000  = $12,720

Cash = Face Value × 95% = $159,000 × 95% = $151,050

So,Redemption gain = Carrying value - Cash

= $171,720 - $151,050 = $20,670

So, the Journal entry for the given data are as follows:

Bonds Payable A/c Dr. $159,000

Bonds Payable premium A/c Dr. $12,720

To Redemption gain A/c $20,670

To Cash A/c $151,050