Question

Pearl Company had bonds outstanding with a maturity value of $292,000. On April 30, 2020, when these bonds had an unamortized discount of $11,000, they were called in at 104. To pay for these bonds, Pearl had issued other bonds a month earlier bearing a lower interest rate. The newly issued bonds had a life of 10 years. The new bonds were issued at 103 (face value $292,000).

Ignoring interest, compute the gain or loss.

Loss on redemption

$

Ignoring interest, record this refunding transaction. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit
(To record redemption of bonds payable)

(To record issuance of new bonds)

Answer 1

Carrying value of old bonds:
par value of bonds redeemed	2,92,000
Less: Unamortized discount	11000
Carrying value of old bonds:	2,81,000
Redemption price (292000*104%)	3,03,680
Loss on redemption		-22,680
Journal entries
S.no.	Accounts title and explanations		Debit $	Credit $
a.	Bonds payable			292000
	Loss on redemption			22,680
	Discount on bonds payable			11000.00
	Cash account				303680.00
	(for redemption of bonds)
b.	Cash account (292000*103%)		300760
	Bonds payable				292000.00
	Premium on bonds payable			8760.00
	(for issuance of new bonds)