Question

On January 1, 2017, Henderson Corporation redeemed $500,000 of bonds at 99. At the time of redemption, the unamortized premium was $15,000. Prepare the corporation’s journal entry to record the reacquisition of the bonds. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to 0 decimal places, e.g. 38,548.)

Answer 1

bonds payable 500,000

premium on bonds payable 15,000

cash 495,000

gain on redemption 20, 000

Step-by-step explanation:

cash disbursements to rescue the bonds:

500,000 x 99/100 = 495,000

carrying value:

bonds payable 500,000

premium 15,000

total 515,000

gain on redemption:

cash disbursements to rescue the bonds: - carrying value:

515,000 - 495,000 = 20,000