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On July 1, Aloha Co. exercises a call option that requires Aloha to pay $224,400 for its outstanding bonds that have a carrying value of $228,200 and a par value of $220,000. The company exercises the call option after the semiannual interest is paid the day before on June 30. Record the entry to retire the bonds.

Respuesta :

Parrain

Answer:

Date                 Account title                                              Debit             Credit

July 1                Bonds Payable                                      $220,000

                        Premium on Bonds Payable                  $8,200

                        Cash                                                                            $224,400

                        Gain on retirement of bond                                       $3,800

Working:

Premium = Carrying value - Par value

= 228,200 - 220,000

= $8,200

Gain on retirement of bond = Carrying amount - Amount paid:

= 228,200 - 224,400

= $3,800

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