Homework Answers
Par value of bonds = $1,020,000
Issue price =98
Cash received from issuance of bonds = Par value of bonds x Issue price
= 1,020,000 x 98%
= $999,600
Discount on issue of bonds = Par value of bonds- Cash received from issuance of bonds
= 1,020,000-999,600
= $20,400
Annual amortization of bond discount = Discount on issue of bonds / Bond life
= 20,400/10
= $2,040
Unamortized bond discount on January 1, 2022 = Discount on issue of bonds - Annual amortization of bond discount
= 20,400-2,040
= $18,360
Carrying value of bonds on January 1, 2022 = Par value of bonds - Unamortized bond discount on January 1, 2022
= 1,020,000-18,360
= $1,001,640
Cash paid to retire bonds = Par value of bonds x Call price
= 1,020,000 x 103%
= $1,050,600
Loss on bond retirement = Cash paid to retire bonds- Carrying value of bonds on January 1, 2022
= 1,050,600-1,001,640
= $48,960
Kindly comment if you need further assistance. Thanks
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