Question

Carpino Corporation redeemed $500,000 of its bonds on June 30, 2020, at 101 and immediately retired...

Carpino Corporation redeemed $500,000 of its bonds on June 30, 2020, at 101 and immediately retired them. The carrying value of the bonds on the retirement date was $510,000. The bonds pay annual interest and the interest payment due on June 30, 2020, and the required entries have been made and recorded. Instructions: Record the entry to retire the bonds.

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Answer #1
Date Account Titles Debit Credit
Jun. 30 Bonds Payable $       500,000
2020 Premium on Bonds Payable $         10,000
      Cash $       505,000
      Gain on Retirement of Bonds $            5,000


Cash paid for retirement of bonds = $500000/100*101 = $505000

Alternatively

Date Account Titles Debit Credit
Jun. 30 Bonds Payable $       510,000
      Cash $       505,000
      Gain on Retirement of Bonds $            5,000
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