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24 March, 02:05

Several years ago, Nicole Company issued bonds with a face value of $1,030,000 for $960,000. As a result of declining interest rates, the company has decided to call the bond at a call premium of 6 percent over par. The bonds have a current book value of $1,013,000. Record the retirement of the bonds, using a discount account.

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  1. 24 March, 03:19
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    Journal Entry

    Explanation:

    The Journal Entry is shown below:-

    Bonds payable Dr, $1,030,000

    Loss on retirement of bond Dr, $78,800

    ($1,091,800 - $1,013,000)

    To discount on bond $17,000

    To cash $1,091,800

    ($1,030,000 * 106%)

    (Being retirement of the bonds is recorded)
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