Question

Ayayai Corp. redeemed $158,000 face value, 12% bonds on April 30, 2022, at 102. The carrying value of the bonds at the redemption date was $142,674. The bonds pay annual interest, and the interest payment due on April 30, 2022, has been made and recorded.

Required:
Prepare the appropriate journal entry for the redemption of the bonds.

Answer 1

Answer and Explanation:

The journal entries are given below:

On 30-Apr

Bond Payable [$158,000] 158,000

Loss on Bond redemption [$161,160 - $142,674] 18,486

Discount on bonds payable 15,326

Cash [$158,000 × 102%] 161,160

[being the redemption of the Bond is recorded]

Here the bond payable and loss is debited as it decreased the assets and increased the losses and credited the cash & discount on bond payable