Answer:
Explanation:
Dr Bond Payable $800,000
Dr Loss on early extinguishment $11,000
Cr Discount on bonds $21,000 (7/10 x $30,000)
Cr Cash $790,000
Supporting calculations:
*Unamortized discount calculation:
Face value of the bond 800,000
Less: issue price of the bond 770,000
Discount on bonds payable 30,000 (800,000-770,000)
Amortization of discount on bonds payable per year under straight line method (30,000/10) 3,000
Unamortized discount for the remaingg 7 years is 21,000 (7*3,000)
*Loss on early extinguishment calculation:
Face value of the bond 800,000
Less: Unamortized discount for the remaingg 7 years 21,000
Carrying value of the bonds (800,000-21,000) 779,000
Retirement price of the bonds 790,000
Loss on early extinguishment -11,000
