A company decides to redeem its bonds before maturity for 101. The face value of the bonds is $5,000,000 and the carrying amount on date of redemption is $4,945,000. The journal entry to record this transaction is:

A company decides to redeem its bonds before maturity for 101. The face value of the bonds is $5,000,000 and the carrying amount on date of redemption is $4,945,000. The journal entry to record this transaction is:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A company decides to redeem its bonds before maturity for 101. The face value of the bonds is $5,000,000 and the carrying amount on date of redemption is
$4,945,000. The journal entry to record this transaction is:

Expert Solution

Step 1: Introduction:

Bonds payable is one of liability being incurred in business. On these bonds, regular interest payments needs to be made out and these can be issued at par value, premium or at discount.

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