The December 31, 2017, balance sheet of Ming Inc. included 12% bonds with a face

Question

The December 31, 2017, balance sheet of Ming Inc. included 12% bonds with a face amount of $105 million. The bonds were issued in 2005 and had a remaining discount of $3,900,000 at December 31, 2017. On January 1, 2018, Ming called the bonds at a price of 102. Required: Prepare the journal entry by Ming to record the retirement of the bonds on January 1, 2018. (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.)

Explanation / Answer

Loss on early retirement of bonds

Note:- Loss on early retirement of bonds = cash payment to bondholders - net book value of bonds

   = 107100000 - [(105000000-3900000)

= 107100000 - 101100000

= $6000000

Date Accounts title Dr. Cr. January 1, 2018 Bonds payable $105000000

Loss on early retirement of bonds

$6000000 To Discount on bonds payable $3,900,000 To cash [$105000000*1.02] $107100000

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