OceanviewMagazine issued$690,000of 15-year,6%callable bonds payable on July 31,2024,at98.On July 31,2027,Oceanviewcalled the bonds at102.Assume annual interest payments. Requirements:1.Without making journal entries, compute the carrying amount of the bonds payable at July 31,2027.2.Assume all amortization has been recorded properly. Journalize the retirement of the bonds on July 31,2027.No explanation is required.

Bonds are high - security debt instruments that is used by entity's to raise funds and fulfill capital requirements. It is a category of debt that borrowers avail from individual investors for a specified tenure. Bonds are purchased by investors at face value or principal, which is returned at the end of a fixed tenure on which they receive a percentage of the principal amount as periodical interest at fixed or adjustable rates.Computation of carrying amount of the bonds payable at July 31,2027 Carrying amount of bonds at issuance that is on July 31,2024 = $690,000 x 0.98 = $676,200 Discount on bonds payable at issuance = $690,000 - $676,200 = $13,800 Carrying amount of bonds payable at July 31,2027 = $690,000 - ($13,800 x Unamortized period/ Total period) = $690,000 - ($13,800 x 12/15) = $690,000 - $11,040 = $678,960 Therefore, carrying amount of bonds payable at July 31,2027 is $678,960. Journal entry to record the retirement of the bonds on July 31,2027 Date Account Titles Debit Amount Credit Amount July 31,2027 Bonds payable $690,000 Loss on retirement or extinguishment of bonds $27,600 Discount on bonds payable $13,800 Cash ($690,000 x 1.02) $703,800 (To record retirement of bonds)

Answered: Oceanview Magazine issued $690,000 of…

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

Oceanview

Magazine issued

$690,000

of 15-year,

callable bonds payable on July 31,

2024,

98.

On July 31,

2027,

Oceanview

called the bonds at

102.

Assume annual interest payments.

Requirements:

1.	Without making journal entries, compute the carrying amount of the bonds payable at July 31, 2027.
2.	Assume all amortization has been recorded properly. Journalize the retirement of the bonds on July 31, 2027. No explanation is required.

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