Question

On January 1, 2015, Sheffield Industries Inc. issued a $1,017,000, 10-year bond. The bond sold at 97, and paid 13% interest each January 1 and July 1. Sheffield called at 103 and cancelled the bond on January 1, 2020. Assume the company used the straight-line method of amortization.

Calculate the gain or loss on redemption.
$=? (Gain/Loss)

Prepare the journal entry to record the early retirement of the bond. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
January 1

Answer 1

Discount On issue of bond = 1017000 - (1017000/100*97)
=$30510
Unamortized discount on January 1, 2020 =$20340/10*5 years
=$15255
Total Bonds value	$          10,17,000
Cash to be paid at redemption (1017000/100*103)	$          10,47,510
Total Unamortized discount on bonds payable	$                15,255
Loss on redemption of bond (1047510+15255-1017000)	$                45,765
Journal Entry
	Debit	Credit
Bonds Payable	$          10,17,000
Loss On Redemption Of Bond	$                45,765
Disount On Bond Payable		$               15,255
Cash		$         10,47,510
(To record redemption of bond)