Question

Pizza Pier retires its 7% bonds for $68,000 before their scheduled maturity. At the time, the...

Pizza Pier retires its 7% bonds for $68,000 before their scheduled maturity. At the time, the bonds have a face value of $70,000 and a carrying value of $74,937.

Record the early retirement of the bonds.

  • Record the early retirement of the bonds.
Event General Journal Debit Credit
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Answer #1

Face value of bonds = $70,000

Carrying value of bonds = $74,937

Unamortized bond premium = Carrying value of bonds- Face value of bonds

= 74,937-70,000

= $4,937

Cash paid to retire bonds = $68,000

Gain on retirement of bonds = Carrying value of bonds- Cash paid to retire bonds

= 74,937-68,000

= $6,937

Event General Journal Debit Credit
1 Bonds payable $70,000
Premium on bonds payable $4,937
Gain on bond retirement $6,937
Cash $68,000
( To record the retirement of the bonds)
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