Exercise 14-12 On January 2, 2012, Sweet Corporation issued $1,350,000 of 10% bo

Question

Exercise 14-12 On January 2, 2012, Sweet Corporation issued $1,350,000 of 10% bonds at 99 due December 31, 2021, Interest on the bonds is payable annually each December 31, The discount on the bonds is also being amortized on a straight-line basis over the 10 years. (Straight-line is not materially different in effect from the preferable "interest method".) The bonds are callable at 102 (i.e., at 102% of face amount), and on January 2, 2017, Sweet called $810,000 face amount of the bonds and redeemed them. Ignoring income taxes, compute the amount of loss, if any, to be recognized by Sweet as a result of retiring the $810,000 of bonds in 2017. (Round answer to 0 decimal places, e.g. 38,548.) Loss on redemption Prepare the journal entry to record the redemption. (Round answers to O decimal places,e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually) DateAccount Titles and Explanation Debit Credit January 2, 2017 Bonds Payable Loss on Redemption of Bonds Discount on Bonds Payable sh

Explanation / Answer

Calculation of Loss on Redemption :-

Working Note :-

Unamortized Discount :-

Discount Amount = $810000 * 1%

= $8100

Unamortized Discount = ($8100/10years)* 5year

= $810 * 5

= $4050

Journal Entry :-

Particulars Amount ($) Amount ($) Requisition Price ($810000*102%) 826200 Less : Par Value 810000 Unamortized Discount (4050) 805950 Loss on Redemption 20250

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