Question

14-4

For each independent situation below, prepare the appropriate journal entry for the retirement.

a) Noble Corporation retired $130,000 face value, 12% bonds on June 30, 2018, at a price of 102. The carrying (book) value of the bonds at the retirement date was $107,500. The bonds pay semiannual interest and the interest payment due on June 30, 2018, has been made and recorded.

b) Vargas, Inc. retired $150,000 face value, 12.5% bonds on June 30, 2018 at a price of 96. The carrying (book) value of the bonds at the redemption date was $151,000. The bonds pay semi-annual interest and the interest payment due on June 30, 2018, has been made and recorded.

Answer 1

a.

Date	Account Titles	Debit	Credit
Jun-30	Bonds Payable	$       1,30,000
2018	Loss on Retirement of Bonds	$           25,100
	Discount on Bonds Payable		$             22,500
	Cash		$          1,32,600

b.

Date	Account Titles	Debit	Credit
Jun-30	Bonds Payable	$       1,50,000
2018	Premium on Bonds Payable	$             1,000
	Cash		$          1,44,000
	Gain on Retirement of Bonds		$                7,000