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On January 2, 2012, Blossom Corporation issued $2,200,000 of 10% bonds at 99 due December 31,...

On January 2, 2012, Blossom Corporation issued $2,200,000 of 10% bonds at 99 due December 31, 2021. 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 102 (i.e., at 102% of face amount), and on January 2, 2017, Blossom called $1,320,000 face amount of the bonds and redeemed them. Ignoring income taxes, compute the amount of loss, if any, to be recognized by Blossom as a result of retiring the $1,320,000 of bonds in 2017. (Round answer to 0 decimal places, e.g. 38,548.) Loss on redemption $ Prepare the journal entry to record the redemption.

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Answer #1
Discount on issuance 22000 = 2200000*(1-0.99)
Unamortized discount on January 2, 2017 11000 =22000*5/10
Unamortized discount relating to Bonds redeemed 6600 =11000*1320000/2200000
Carrying value of Bonds redeemed 1313400 =1320000-6600
Cash paid for redemption 1346400 =1320000*1.02
Less: Carrying value of Bonds redeemed 1313400
Loss on redemption 33000
Journal entry:
Bonds payable 1320000
Loss on redemption of bonds 33000
         Discount on bonds payable 6600
         Cash 1346400
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