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On January 2, 2012, Flounder Corporation issued $ 2,050,000 of 10% bonds at 96 due December...

On January 2, 2012, Flounder Corporation issued $ 2,050,000 of 10% bonds at 96 due December 31, 2021. Interest on the bonds is payable annually each December 31. The discount on the bonds is also being amortized on a straight-line basis over the 10 years. (Straight-line is not materially different in effect from the preferable “interest method”.) The bonds are callable at 101 (i.e., at 101% of face amount), and on January 2, 2017, Flounder called $ 1,230,000 face amount of the bonds and redeemed them. Ignoring income taxes, compute the amount of loss, if any, to be recognized by Flounder as a result of retiring the $ 1,230,000 of bonds in 2017

Loss on Redemption=

Prepare the journal entry to record the redemption

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Answer #1
Issue Price 1968000 (2050000*0.96)
Discount amount 82000
Unamortized portion 41000
Unamortized portion for redeemed bonds 24600
Calculation of Loss on Redemption
Redemption value 1242300
Unamortized discount 24600
Less: Bond face value 1230000
Loss on Redemption 36900
Date Account title and Explanation Debit Credit
Bond payable 1230000
Loss on redemption of bond 36900
Unamortized discount on Bond 24600
Cash 1242300
(To record Redemption)
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