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Discount Pizza retires its 7% bonds for $68,000 before their scheduled maturity. At the time, the bonds have a face amount of $70,000 and a carrying value of $64,168. Record the early retirement of the bonds. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

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Answer:

The Journal entry and their narrations for recording the bonds retirement is shown below:-

Explanation:

The Journal entry is shown below:-

Bonds payable Dr,                                 $70,000  

Loss on redemption of bonds Dr,         $3,832

($68,000 - $64,168) 

            To Bond discount amortization           $5,832

($70,000 - $64,168)

             To Cash                                               $68,000

(Being bonds retirement is recorded)

So, for recording the early retirement of the bonds we debited the bonds payable and loss on redemption of bonds and credited the bond discount amortization and cash.

abiolataiwo2015

Based on the information given the appropriate journal entry to record the early retirement of the bonds is:

Debit Bonds Payable $70,000  

Debit Loss on Retirement of bonds $3,832

Credit Discount on amortization  $5,832

Credit Cash $68,000

Journal entry in the books of Discount Pizza:

Debit Bonds Payable $70,000  

Debit Loss on Retirement of bonds $3,832

($68,000 - $64,168)

Credit Discount on amortization  $5,832

($70,000 - $64,168)

Credit Cash $68,000

(To record early retirement of bonds)

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