The December 31, 2015, balance sheet of Ming Inc. included 8% bonds with a face

Question

The December 31, 2015, balance sheet of Ming Inc. included 8% bonds with a face amount of $102 million. The bonds were issued in 2005 and had a remaining discount of $3,600,000 at December 31, 2015. On January 1, 2016, Ming called the bonds at a price of 103.

Prepare the journal entry by Ming to record the retirement of the bonds on January 1, 2016. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)

The December 31, 2015, balance sheet of Ming Inc. included 8% bonds with a face amount of $102 million. The bonds were issued in 2005 and had a remaining discount of $3,600,000 at December 31, 2015. On January 1, 2016, Ming called the bonds at a price of 103.

Explanation / Answer

The loss on redemption:

Redemption price = 102,000,000 * 1.03          =105,060,000

Less: carrying value of the bonds:

face value                           = 102,000,000

less: unamortized discount =     3,600,000          98,400,000

       Loss on redemption                                      6,660,000.

The journal entry for the retirement of the bonds is:

Bonds payable...........................102,000,000

loss on redemption of bonds.....    6,660,000

                  discount on bonds payable..........................3,600,000

                  cash.........................................................105,060,000

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