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5 April, 17:24

Novak Corp. redeemed $134,000 face value, 10% bonds on April 30, 2022, at 103. The carrying value of the bonds at the redemption date was $121,002. The bonds pay annual interest, and the interest payment due on April 30, 2022, has been made and recorded. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

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  1. 5 April, 19:01
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    bonds payable 134,000 debit

    loss on redemption 17,018 debit

    cash 138,020 credit

    discount on bonds payabke 12,998 credit

    Explanation:

    redemption disbursement:

    face value x redemption quote

    134,000 x 103/100 = 138,020

    carrying value: 121,002

    loss at redemption 17,018

    We are using 138,020 cash (asset) to pay a liability for 121,002

    discount/premium on the bonds:

    face value 134,000

    carrying value 121,002

    discount: 12,998

    In the journal entry we must write-off the bond payable and the discount. Then, declare the loss at redemption and the cash used.
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