Question

Several years ago, Walters Company issued bonds with a face value of $617,000 at par. As a result of declining interest rates, the company has decided to call the bond at a call premium of 7 percent over par. Record the retirement of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Step-by-step explanation:

The journal entry for the retirement of bonds is shown below:

Bonds payable A/c Dr $617,000

Loss on bond call A/c $43,190 ($617,000 × 0.07)

To Cash A/c $660,190

(Being the retirement of the bond is recorded)

For recording this journal entry, we debited the bond payable account and loss on the bond call account and credited the cash account so that proper entry could be made.