Question

The December 31, 2020, balance sheet of Ming Inc. Included 10% bonds with a face amount of $103 million. The bonds were issued in 2008 and had a remaining discount of $3,700.000 at December 31, 2020. On January 1, 2021, Ming called the bonds at a price of 101. Required: Prepare the journal entry by Ming to record the retirement of the bonds on 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 < 1 Record the retirement of the bonds on January 1, 2021 Note: Enter debits before credits Date General Journal Debit Credit January 01, 2021

Answer 1

Carrying value of bonds = Face value - Unamortized discount Carrying value of bonds = $103,000,000 - $3,700,000 Carrying value of bonds = $99,300,000 Redemption value = $103,000,000*101% Redemption value = $104,030,000 Redemption value is more than the carrying value of the bonds, hence there will be loss on retirement of bonds. Loss on retirement = $104,030,000 - $99,300,000 Loss on retirement = $4,730,000 Credit Debit $ 103,000,000 $ 4,730,000 Date Account Titles and Explanation 01-01-2021 Bonds payable Loss on bond retirement Discount on bonds payable Cash ($103,000,000*101%) (To record the retirement of bonds) $ 3,700,000 $ 104,030,000