Question

The balance sheet of Indian River Electronics Corporation as of December 31, 2020, included 12.25% bonds having a face amount of $90 million. The bonds had been issued in 2013 and had a remaining discount of $3 million at December 31, 2020. On January 1, 2021 Indian River Electronics called the bonds before their scheduled maturity at the call price of 102 Required: Prepare the journal entry by Indian River Electronics to record the redemption of the bonds at January 1, 2021 (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.) View transaction list Journal entry worksheet Record the redemption of the bonds. Note: Enter debits before credits General Journal Debit Credit Date January 01 2021 Record entry Clear entry View general Journal

Answer 1

Redemption price = Par value of bonds + Call premium
= 90,000,000 + 90,000,000 x 2%
= 90,000,000 + 1,800,000
= $91,800,000
Unamortized Discount on bonds payable = $3,000,000
Carrying value of bonds = Face value of the bonds - unamortized bond discount at the redemption date.
= 90,000,000 – 3,000,000
= $87,000,000
Loss on bonds redemption = Redemption price – Carrying value of bonds
= 91,800,000 - 87,000,000
= $4,800,000

Date	General Journal	Debit	Credit
January 01, 2021	Bonds payable	$90,000,000
	Loss on bonds redemption	$4,800,000
	Discount on bonds payable		$3,000,000
	Cash		$91,800,000
	( Record the redemption of bonds)

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