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BARSIC [14]
3 years ago
14

Recording the Early Retirement of a Bond Issued at a Premium (with Premium Account) LO10-7 Several years ago, Cyclop Company iss

ued bonds with a face value of $1,000,000 for $1,140,000. As a result of declining interest rates, the company has decided to call the bonds at a call premium of 5 percent over par. The bonds have a current book value of $1,037,000. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Required: Record the retirement of the bonds, using a premium account.
Business
1 answer:
Vanyuwa [196]3 years ago
3 0

Answer:

Date   Account Titles and Explanation        Debit            Credit

           Bonds payable                              $1,000,000

           Loss on retirement of bond          $13,000

           [$1,050,000 - $1,037,000]

           Premium on bond                          $37,000

                    Cash (1,000,000*105%)                                $1,050,000

(Record the retirement of the bonds, using a premium account)

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