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The balance sheet for Oriole Consulting reports the following information on July 1, 2020. Long-term liabilities...

The balance sheet for Oriole Consulting reports the following information on July 1, 2020. Long-term liabilities Bonds payable $4,500,000 Less: Discount on bonds payable 180,000 $4,320,000 Oriole decides to redeem these bonds at 104 after paying annual interest. Prepare the journal entry to record the redemption on July 1, 2020.

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Answer #1

Par value of bonds = $4,500,000

Bonds are redeemed at 104

Cash paid to retire bonds = Par value of bonds x 104%

= 4,500,000 x 104%

= $4,680,000

Carrying value of bonds = $4,320,000

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

= 4,680,000-4,320,000

= $360,000

Date General Journal Debit Credit
July 1, 2020 Bonds payable $4,500,000
Loss on bond retirement $360,000
Discount on bonds payable $180,000
Cash $4,680,000
( to record the redemption of bonds)
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