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Hulse Corporation retires its $800,000 face value bonds at 105 when the carrying value of the...

Hulse Corporation retires its $800,000 face value bonds at 105 when the carrying value of the bonds at the redemption date is $829,960. Prepare the journal entry to record the retirement of the bond.

Solutions

Expert Solution

Retiring value of bonds = $800,000 * 1.05. = $840,000

Carrying value = $829,960

Since the amount paid to retire the bonds is higher than the carrying value on the bonds, the company needs to record a loss on retirement.

Loss on Retirement = $840,000 - $829,960 = $10,040

Particulars Amount Amount
Bonds Payable A/c                   800,000
Loss on Retirement of Bonds                      10,040
Premium on Bonds payable 29,960
            To Cash 840,000
(To record the retirement on bonds)

Since the carrying value of the bonds is greater than the par value of the bonds $800,000, the bonds have been issued at a premium. Hence the Premium on bonds at the time of the retirement is:- $840,000 - $800,000 - $10,040 = $29,960

ekkarill92 answered 1 year ago
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