Exercise 14-15 Blossom Company had bonds outstanding with a maturity value of $2

Question

Exercise 14-15

Blossom Company had bonds outstanding with a maturity value of $280,000. On April 30, 2017, when these bonds had an unamortized discount of $10,000, they were called in at 104. To pay for these bonds, Blossom had issued other bonds a month earlier bearing a lower interest rate. The newly issued bonds had a life of 10 years. The new bonds were issued at 101 (face value $280,000).

Ignoring interest, compute the gain or loss.

Ignoring interest, record this refunding transaction. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

(To record redemption of bonds payable)

(To record issuance of new bonds)

Loss on redemption $

Explanation / Answer

1) Calculation of loss on redemption

1) Calculation of loss on redemption

Particulars Amount Amount Reaquisition price (280000*104%) $   291,200 Less: net carrying amount of bonds redeemed Par value $        280,000 unamortized discount $        (10,000) $   270,000 Loss on redemption $     21,200 2) Accounts and Explanation Debit credit Bonds payable 280000 Loss on redemption on bonds 21200 Discount on bonds payable 10000 cash 291200 To record redemption of the bonds payable cash ( 2800+280000) 282800 premium on bonds payable (280000*1%) 2800 bonds payable 280000 To record the issue of new bond

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