Question

LakesideLakeside Magazine issued $690,000 of​ 15-year, 9% callable bonds payable on July​ 31, 2018​, at 97.On July​ 31, 2021​, Lakeside called the bonds at 102. Assume annual interest payments.

Requirement 1. Without making journal​ entries, compute the carrying amount of the bonds payable at July​ 31, 2021.

​(Assume bonds payable are amortized using the​ straight-line amortization​ method.)

​First, complete the sentence below.

The carrying amount of the bonds payable at issuance (July 31, 2018) is $			669,300	. The	discount	on the bonds at
issuance amounts to $	20,700	.

The carrying amount of the bonds payable at July 31, 2021 is $

2.	Assume all amortization has been recorded properly. Journalize the retirement of the bonds on July​ 31, 2021. No explanation is required

Answer 1

Discount amount = 690000*3% = 20700
Un-amortised discount amount on
July 31,21 = (20700*12/15) = 16560
(being straight line amortisation)
Carrying amount of bonds payable at
July 31, 21 = 690000 - 16560 = 673440
Sentence: Carrying amount at the
issuance is 669300 with discount
amount 20700.
The carrying amount of the bonds payable
at July 31, 21 is $673440.
Journal entry towards retirement of
the bonds on July 31, 21 :
ACCOUNTS TITLES:	Debit $	Credit $
Bonds Payable	690000
Loss on retirement of Bonds Payable	30360
Discount on Bonds Payable		16560
Cash		703800	(690000*102%)