On January 1, 2020, Vaughn Corporation issued $5,480,000 of 10% bonds at 101 due December 31, 2029. Vaughn paid $75,000 inbond issue costs when the bonds were issue to the market. These will be amortized over the life of the bond. The premium on thebonds is also being amortized on a straight-line basis over the 10 years. (Straight-line is not materially different in effect from thepreferable "interest method".)The bonds are callable at 105 (i.e., at 105% of face amount), and on January 2, 2025, Vaughn called one-half of the bonds and retiredthem.Ignoring income taxes, compute the amount of loss, if any, to be recognized by Vaughn as a result of retiring the $2,740,000 of bonds in2025.Loss on redemption $Prepare the journal entry to record the retirement. (If no entry is required, select "No Entry" for the account titles and enter O for theamounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries beforecredit entries.)DateJanuary 2,2025Account Titles and ExplanationBonds PayableLoss on Redemption of BondsDiscount on Bonds PayableCashDebit2740000Credit2877000

Loss of redemption is the difference between carrying or book value of bond and redemption value.…

s when the bonds were issue to the market. These will be amortized ing amortized on a straight-line basis over the 10 years. (Straight-line rest method".) allable at 105 (i.e., at 105% of face amount), and on January 2, 2025,

s when the bonds were issue to the market. These will be amortized ing amortized on a straight-line basis over the 10 years. (Straight-line rest method".) allable at 105 (i.e., at 105% of face amount), and on January 2, 2025,

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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