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Intermediate Accounting: Reporting...
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Intermediate Accounting: Reporting...
On June 1, 2019, Fignon Company recalls bonds with a face value of $200,000 and a current book value of $190,000. Fignon pays $192,000 to retire the bonds. Prepare the journal entry to record the retirement of the bonds.
Prepare the journal entry to record the retirement of the bonds.
Retirement of bonds:
Bond retirement involves the payback of bonds at the face value. This includes the following
Retirement of bonds at maturity: The carrying value will be equal to the face value of the bond when a bond matures at the time of maturity.
Retirement of bonds before maturity: When bonds mature before maturity date, those bonds are called callable bonds. They are paid off at a specific price by providing an incentive to the holder.
Prepare the journal entry to record retirement of bonds.
| Date | Account titles and Explanation | Debit | Credit |
| June 1, 2019 | Bonds payable | $200,000 | Â |
| Â | Loss on Bond redemption (2) | $2,000 | Â |
| Â | Â Â Â Â Discount on bonds payable (1) | Â | $10,000 |
| Â | Â Â Â Â Â Cash | Â | $192,000 |
| Â | (To record retirement of bonds) | Â | Â |
Table (1)
Working notes:
(1)Calculate discount on bonds payable...
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