Question

When a bond is redeemed for less than its face value, the journal entry includes a debit to _____________

and a debit to _____________ and a credit to _________

Answer 1

When a bond is redeemed for less than its face value, the journal entry involves a debit to Bonds Payable, a debit to Loss on Bond Redemption, and a credit to Cash.

Step-by-step explanation:

When a bond is redeemed for less than its face value, the journal entry includes a debit to Bonds Payable for the face value of the bond, a credit to Cash for the amount paid for the redemption, and the balancing figure would be a debit to Loss on Bond Redemption if the bond is redeemed for less than its carrying amount (book value), which reflects the loss the company incurs from the redemption.

For example, if a $1,000 bond is redeemed for $950, the journal entry would be: Debit Bonds Payable $1,000, Debit Loss on Bond Redemption $50, and Credit Cash $950.