Navarro, Inc., issued $250,000 of eight percent, 20‑year bonds at 98 on June 30, 2012. Interest is payable semiannually on December 31 and June 30. Through June 30, 2018, Navarro amortized $3,000 of the bond discount. On June 30, 2018, Navarro retired the bonds at 102 (after making the interest payment on that date).

Required:

1. Prepare the journal entry to record the bond retirement on June 30, 2018.

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9 October, 04:48

Navarro, Inc., issued $250,000 of eight percent, 20‑year bonds at 98 on June 30, 2012. Interest is payable semiannually on December 31 and June 30. Through June 30, 2018, Navarro amortized $3,000 of the bond discount. On June 30, 2018, Navarro retired the bonds at 102 (after making the interest payment on that date).

Required:

1. Prepare the journal entry to record the bond retirement on June 30, 2018.

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Answers (1)

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Kaylynn Buckley · Answer 1

For recording the bond retirement we debited the bonds payable, loss on bonds retirement and discount on bonds payable and credited the cash.

Explanation:

Bonds payable Dr, $250,000

Loss on bonds retirement Dr, $7,000

Discount on bonds payable Dr, $2,000

To Cash $255,000

(Being redemption of bonds is recorded)

Working Note:-

Issue price of bonds

($250,000 * 100 * 98) $245,000

Face value $250,000

Discount on bonds $5,000

Discount amortized $3,000

Unamortized Discount $2,000

Redemption price

($250,000 : 100 * 102) $255,000