Question

On May 1, 2016, Big Star Corporation issued $510,000 face value, 10 percent bonds at 98.6....

On May 1, 2016, Big Star Corporation issued $510,000 face value, 10 percent bonds at 98.6. The bonds are dated May 1, 2016, and mature 10 years later. The discount is amortized on each interest payment date. The interest is payable semiannually on May 1 and November 1. On May 1, 2018, after paying the semiannual interest, the corporation purchased the outstanding bonds from the bondholders and retired them. The purchase price was 98.9.

Prepare the entry in general journal form to record the repurchase and retirement of the bonds. (Use the Loss on Early Retirement of Bonds account.)

A.

Record retirement of bonds repurchased.?
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Answer #1

Bond issue price = 510000*98.6/100 = 502860

Discount on bonds payable = 510000-502860 = 7140

Semiannually amortization = 7140/20 = 357

Total amortization = 357*4 = 1428

Unamortized discount on may 1,2018 = 7140-1428 = 5712

Journal entry :

Date account & explanation debit credit
Bonds payable 510000
Loss on retirement of bonds 102
    Discount on bonds payable 5712
     Cash (510000*98.9/100) 504390
(To record retirement of bonds)
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