3. Bonds Retirement Q8. Pizza Pier retires its 7% bonds for $68,000 before their

Question

3. Bonds Retirement Q8. Pizza Pier retires its 7% bonds for $68,000 before their scheduled maturity. At the time, the bonds have a face value of $70,000 carrying value of S74,937 1) Was the bond issued at a discount or premium? Is there a gain or loss for the early retirement? How much? 2) 3) Record the early retirement of the bonds. Q9. Magic Mountain retires its 8% bonds for $127,000 before their scheduled maturity. At the time, the bonds have a face value of 125,000 and a carrying value of $118,000 1) 2) 3) Was the bond issued at a discount or premium? Is there a gain or loss for the early retirement? How much? Record the early retirement of the bonds.

Explanation / Answer

Q8 )

1) Bond issued at premium

2) Gain on retirement = (74937-68000) = 6937

3) Journal entry :

date accounts & explanation debit credit Bonds payable a/c 70000 Premium on bonds payable a/c 4937 Cash a/c 68000 Gain on retirement of bonds 6937 (To record early retirement of bonds)

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