Question

Kant Corporation retires its $500,000 face value bonds at 102 on January 1, following the payment of interest. The carrying value of the bonds at the redemption date is $481,250. The entry to record the redemption will include a

Answer 1

Answer and Explanation:

The Journal entry is shown below:-

Bonds payable Dr, $500,000

Loss on retirement of bonds Dr, $28,750

($510,000 + $18,750 - $500,000 )

To Cash $510,000 ($500,000 × 1.02)

To discount on bonds payable $18,750 ($500,000 - $481,250)

(Being redemption is recorded)

Here we debited the bonds payable and loss on retirement of bonds as it decreased the liabilities and increased the loss and we credited the cash and discount on bonds payable as it decreased the assets and increased the liabilities