On January 1,2021,Catty Company issued$840,000 of 8%,10-year bonds for 97. Catty retired all of these bonds...
Homework Answers
Par value of bonds = $840,000
Issue price =97
Cash received from issuance of bonds = Par value of bonds x Issue price
= 840,000 x 97%
= $814,800
Discount on issue of bonds = Par value of bonds- Cash received from issuance of bonds
= 840,000-814,800
= $25,200
Annual amortization of bond discount = Discount on issue of bonds / Bond life
= 25,200/10
= $2,520
Unamortized bond discount on January 1, 2022 = Discount on issue of bonds - Annual amortization of bond discount
= 25,200-2,520
= $22,680
Carrying value of bonds on January 1, 2022 = Par value of bonds - Unamortized bond discount on January 1, 2022
= 840,000-22,680
= $817,320
Cash paid to retire bonds = Par value of bonds x Call price
= 840,000 x 102%
= $856,800
Loss on bond retirement = Cash paid to retire bonds- Carrying value of bonds on January 1, 2022
= 856,800-817,320
= $39,480
Kindly comment if you need further assistance. Thanks‼!
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