Explanation Retirement of Bonds: The process of repaying the sale amount of bonds to bondholders at the time of maturity or before the maturity period is called as redemption of bonds. It is otherwise called as redemption of bonds. Prepare journal entry to record the retirement of bonds: Date Account Title and Explanation Post Ref. Debit ($) Credit ($) July 1, Bonds Payable 400,000 Premium on bonds payable (1) 16,000 Gain on retirement of bonds (2) 8,000 Cash 408,000 ( To record the retirement of bonds ) Table (1) To record the retirement of bonds: Bonds Payable is a liability account and it is decreased. Therefore, debit Bonds Payable account by $400,000. Premium on bonds payable is an adjunct-liability and it is decreased by $16,000. Therefore, debit premium on bonds payable account by $16,000. Gain on retirement of bonds is a component of stockholders’ equity and the amount is increased. Therefore credit gain on retirement of bonds by 8,000. Cash is an asset account and it is decreased. Therefore credit cash account by $408,000...

24th Edition

ISBN: 9781260158625

Author: Wild

Publisher: MCG

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Prepare journal entry to record the retirement of bonds.

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Prepare journal entry to record the retirement of bonds.

Solution Summary: The author explains the process of repaying the sale amount of bonds to bondholders at the time of maturity or before the maturity period.

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