The balance sheet for Cullumber Company reports the following information on Jul

Question

The balance sheet for Cullumber Company reports the following information on July 1, 2017.

Long-term liabilities

  Bonds payable

  Less: Discount on bonds payable

Cullumber decides to redeem these bonds at 102 after paying annual interest.

Prepare the journal entry to record the redemption on July 1, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date

Account Titles and Explanation

Debit

Credit

July 1

CULLUMBER COMPANY
Balance Sheet (partial)

Long-term liabilities

  Bonds payable

$3,400,000

  Less: Discount on bonds payable

76,500 $3,323,500

Explanation / Answer

Solution: Following is the required journal entry:

Cash = 3400000*102% = $3,468,000

Loss on Redemption = $3468000-3,323,500

= $144,500

Date Particulars Debit($) Credit($) July 1 Bonds Payable 3,400,000 Loss on Redemption 144,500 Discount on bonds payable 76,500 Cash 3,468,000

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