# A $1,500,000 bond issue on which there is an unamortized discount of$70,100 is redeemed for $1,455,000. Journalize the redemption of the bonds. BuyFindarrow_forward ### Financial Accounting 15th Edition Carl Warren + 2 others Publisher: Cengage Learning ISBN: 9781337272124 #### Solutions Chapter Section BuyFindarrow_forward ### Financial Accounting 15th Edition Carl Warren + 2 others Publisher: Cengage Learning ISBN: 9781337272124 Chapter 14, Problem 7PEA Textbook Problem 1 views ## A$1,500,000 bond issue on which there is an unamortized discount of $70,100 is redeemed for$1,455,000. Journalize the redemption of the bonds.

To determine

Journalize the redemption of the bonds.

### Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations. Discount on bonds payable: It occurs when the bonds are issued at a low price than the face value. Journalize the redemption of the bonds.  Date Account Title and Explanation Post Ref Debit ($) Credit ($) Bonds Payable Â 1,500,000 Loss on Redemption of Bonds Payable 25,100 Â Discount on Bonds Payable 70,100 Â Â Â Cash 1,455,000 Â Â Â (To record the redemption of the bonds) Â Table (1) • Bonds payable is a liability and it is decreased. So, debit it by$1,500,000.
• Loss on Redemption of Bonds Payable is an equity account and it is decreased. So, debit it by $25,100. • Discount on Bonds Payable is an adjunct liability account and it is increased. So, credit it by$70,100.
• Cash is an asset and it is decreased. So, credit it by \$1,455,000

Working notes:

Determine the gain or loss on the redemption of the bonds payable.

Step 1: Calculate carrying amount of bonds payable on the redemption...

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