Answer:
Answer for the question:
Three years ago American Insulation Corporation issued 10%, $800,000, 10-year bonds for $770,000. American Insulation exercised its call privilege and retired the bonds for $790,000. The corporation uses the straight-line method to determine interest. Required: Prepare the journal entry to record the call of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
is given in the attachment.
Explanation:
Answer:
Explanation:
Bond Payable is $800,000
Loss on early extinguishment well be $11,000
Discount on bonds $21,000 (7/10 x $30,000)
Cr Cash $790,000
Supporting calculations:
discount calculation:
Face value 800,000
The Less: issue price of the bond 770,000
Discount on bonds payable 30,000(800,000-770,000)
Amortization of discount on bonds30,000/10 = 3,000
Unamortized discount for the remaingg 7 years is 21,000 ( 7×3,00)
Loss on the early extinguishment calculation:
Face value of the bond 800,000
Less: 7 years is 21,000
Carrying value of the bonds is 800,000-21,000= 779,000
Retirement price of the bonds 790,000
