Question

On January 2, 2012, Marin Corporation issued $1,050,000 of 10% bonds at 97 due December 31, 2021. Interest on the bonds is payable annually each December 31. The discount on the bonds is also being amortized on a straight-line basis over the 10 years. (Straight-line is not materially different in effect from the preferable “interest method”.)

The bonds are callable at 102 (i.e., at 102% of face amount), and on January 2, 2017, Marin called $630,000 face amount of the bonds and redeemed them.

Ignoring income taxes, compute the amount of loss, if any, to be recognized by Marin as a result of retiring the $630,000 of bonds in 2017. (Round answer to 0 decimal places, e.g. 38,548.)

Loss on redemption $ Prepare the journal entry to record the redemption. (Round answers to 0 decimal places, e.g. 38,548. 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.) date account titles and explanation debit credit

Answer 1

Marin Corporation
Journal Entries
Cash A/C=($1050000*97/100)	$      1,018,500.00
To Discount on bonds payable	$            31,500.00
To Bonds Payable		$         1,050,000.00
Bonds discount amortization schedule Straight line method
(A)	(B)	(C )	(D)	(E )	(f)	(g)
Period	Interest Payment	Interest Expense	Bond discount	Bond discount account	Bonds Payable Account	Book Value of the bonds
	($1050000*10%)	(C )=(B)-(D)			Face Value
2-Jan-12				$                       31,500.00	$ 1,050,000.00	$        1,018,500.00
31-Dec-12	$         105,000.00	$             101,850.00	$              3,150.00	$                       28,350.00		$        1,021,650.00
31-Dec-13	$         105,000.00	$             101,850.00	$              3,150.00	$                       25,200.00		$        1,024,800.00
31-Dec-14	$         105,000.00	$             101,850.00	$              3,150.00	$                       22,050.00		$        1,027,950.00
31-Dec-15	$         105,000.00	$             101,850.00	$              3,150.00	$                       18,900.00		$        1,031,100.00
31-Dec-16	$         105,000.00	$             101,850.00	$              3,150.00	$                       15,750.00		$        1,034,250.00
31-Dec-17	$         105,000.00	$             101,850.00	$              3,150.00	$                       12,600.00		$        1,037,400.00
31-Dec-18	$         105,000.00	$             101,850.00	$              3,150.00	$                         9,450.00		$        1,040,550.00
31-Dec-19	$         105,000.00	$             101,850.00	$              3,150.00	$                         6,300.00		$        1,043,700.00
31-Dec-20	$         105,000.00	$             101,850.00	$              3,150.00	$                         3,150.00		$        1,046,850.00
31-Dec-21	$         105,000.00	$             101,850.00	$              3,150.00	$                                      -		$        1,050,000.00
Total	$      1,050,000.00	$         1,018,500.00	$           31,500.00
Journal Entry of Redemption of 6300 Bonds before maturity on January 2, 2017
Account Title & Explaination	Amount(Dr)	Amount(Cr)
Bonds Payable=($1034250*6300/10500)	$         620,550.00
Loss on redemption of Bonds(Balancing figure)	$            37,800.00
Discount on Bonds Payable=(3150*5)		$               15,750.00
To Cash=6300*102		$             642,600.00