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Tyrell Company issued callable bonds with a par value of $48,000. The call option requires Tyrell...

Tyrell Company issued callable bonds with a par value of $48,000. The call option requires Tyrell to pay a call premium of $500 plus par (or a total of $48,500) to bondholders to retire the bonds. On July 1, Tyrell exercises the call option. The call option is exercised after the semiannual interest is paid the day before on June 30. Record the entry to retire the bonds under each separate situation. 1. The bonds have a carrying value of $37,500. 2. The bonds have a carrying value of $49,000

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Answer #1

Journal Entries:

Date Particulars Debit Credit
1 1-Jul Bond Payable Dr $48,000.00
Loss on retirement of bond Dr $11,000.00
      To Cash $48,500.00
      To Discount on bond payable $10,500.00
(To record early retirement of bond)
2 1-Jul Bond Payable Dr $48,000.00
Premium on bond payable Dr $1,000.00
      To Cash $48,500.00
      To Gain on retirement of bond $500.00
(To record early retirement of bond)
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