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12 January, 15:11

Tyrell Company issued callable bonds with a par value of $10,000. The call option requires Tyrell to pay a call premium of $500 plus par (or a total of $10,500) to bondholders to retire the bonds. On July 1, Tyrell exercises the call option. The call option is exercised after the semiannual interest is paid the day before on June 30. Record the entry to retire the bonds under each separate situation.

(1) The bonds have a carrying value of $9,000.

(2) The bonds have a carrying value of $11,000.

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  1. 12 January, 16:35
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    Tyrell company

    Journal entries

    Jul-01

    Dr Bonds Payable $10000

    Dr Loss on retirement $1,500

    Cr Discount on Bonds Payable [10000 - 9000] $1,000

    Cr Cash [10000 + 500] $10,500

    Jul-01

    Dr Bonds Payable $10,000

    Dr Premium on Bonds Payable [11000 - 10000] $1,000

    Cr Gain on retirement of bonds $500

    Cr Cash [10000 + 500] $10,500
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