Question

Maria Corporation purchased $720,000 of its bonds on June 30, 2020, at 103 and immediately retired them. The carrying value of the bonds on the retirement date was $675,000. The bonds pay annual interest and the interest payment due on June 30, 2020, has been made and recorded. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit June 30 enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount Blue Spruce, Inc., purchased $352,000 of its bonds at 98 on June 30, 2020, and immediately retired them. The carrying value of the bonds on the retirement date was $350,000. The bonds pay annual interest and the interest payment due on June 30, 2020, has been made and recorded. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit June 30 enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount

Answer 1

First bond:

dr notes payable $720,000

dr loss on bond redemption $66,600

cr discount on notes payable $45,000

cr cash $741,600

second bond:

dr notes payable $350,000

cr premium on bonds payable $2,000

cr cash $343,000

cr gain on bond redemption $5,000

Step-by-step explanation:

The discount balance outstanding on the first bond is the face value of $720,000 minus the carrying value of $675,000,i.e $45,000($720,000-$675,000).

The amount of cash paid on redemption is $720,000*103%=$741,600

The outstanding premium on the second is $2,000($352,000-$350,000)

The amount of cash paid was $343,000( $350,000*98%)

Answer 2

A.Maria Corporation Journal entry

June30

Dr Bonds Payable 675,000

Dr Loss on Bond Redemption 66,600

Cr Cash 741,600

B.Spruce, Inc. Journal entry

June30

Dr Bonds Payable 350,000

Dr Gain on Bond Redemption 5,040

Cr Cash 344,960

Step-by-step explanation:

A. Maria Corporation Journal entry

June 30, 2020

Dr Bonds Payable 675,000

Dr Loss on Bond Redemption 66,600

Cr Cash 741,600

($720,000 × 103% )

B.Spruce, Inc. Journal entry

June 30, 2020

Dr Bonds Payable 350,000

Dr Gain on Bond Redemption 5,040

Cr Cash 344,960

($352,000 × 98%)