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25 June, 12:42

The situations presented here are independent of each other. For each situation, prepare the appropriate journal entry for the redemption of the bonds. Pelfer Corporation redeemed $160,000 face value, 10% bonds on April 30, 2014, at 105. The carrying value of the bonds at the redemption date was $144,571. The bonds pay annual interest, and the interest payment due on April 30, 2014, has been made and recorded. 2-Youngman, Inc., redeemed $250,400 face value, 14.3% bonds on June 30, 2014, at 96. The carrying value of the bonds at the redemption date was $271,021. The bonds pay annual interest, and the interest payment due on June 30, 2014, has been made and recorded.

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  1. 25 June, 15:28
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    Answer and Explanation:

    The Journal entry is shown below:-

    1. Bonds payable Dr, $160,000

    Loss on bond redemption Dr, $23,429

    ($160,000 * 1.05 - $144,571)

    To Discount on bond payable $15,429

    ($160,000 - $144,571)

    To Cash $168,000

    ($160,000 : 100 * 105)

    (Being redemption of bonds is recorded)

    2. Bonds payable Dr, $250,400

    Premium on bond payable Dr, $20,621

    ($271,021 - $240,384)

    To Gain on bond redemption $30,637

    ($271,021 - $240,384)

    To Cash $240,384

    ($240,384 : 100 * 96)

    (Being redemption on bonds is recorded)
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