Question

Kant Corporation retires its $100,000 face value bonds at 102 on January 1, following the payment of interest. The carrying value of the bonds at the redemption date is $96,250. The entry to record the redemption will include a

Answer 1

Refer to the explanation below

Step-by-step explanation:

Please see the journal entry below;

Dr Bonds payable $100,000

Dr Loss on retirement of bonds

$5,750

( $102,000 + $3,750 - $100,000)

To Cash $102,00( $100,000 × 1.02)

To Discount on bonds payable

$3,750( $100,000 - $96,250)

(Being redemption that is recorded)

Because bonds payable and loss on retirement of bonds decreases the liability and increased the loss, hence were debited. Cash and discount on bonds payable were credited because it decreases the assets and increased liabilities respectively.