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On January 2, 2015, Flint Corporation issued $2,050,000 of 10% bonds at 96 due December 31,...

On January 2, 2015, Flint Corporation issued $2,050,000 of 10% bonds at 96 due December 31, 2024. 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, 2020, Flint 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 Flint as a result of retiring the $1,230,000 of bonds in 2020. (Round answer to 0 decimal places, e.g. 38,548.)

Loss on redemption $enter a dollar amount of loss on redemption rounded to 0 decimal places


Prepare the journal entry to record the redemption

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Answer #1
Discount on issue 82000 =2050000*(1-0.96)
Discount amortized for 5 years 41000 =82000*5/10
Unamortized discount 41000 =82000-41000
Unamortized discount related to bonds redeemed 24600 =41000*1230000/2050000
Amount paid for redemption 1242300 =1230000*1.01
Less: Book value of bonds redeemed 1205400 =1230000-24600
Loss on redemption 36900
2
General Journal Debit Credit
Bonds payable 1230000
Loss on redemption of bonds 36900
     Discount on Bonds payable 24600
     Cash 1242300
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