Question

on january 1, 2027, shay company issues $430,000 of 8%, 15-year bonds. the bonds sell for $417,100. six years later, on january 1, 2033, shay retires these bonds by buying them on the open market for $450,425. all interest is accounted for and paid through december 31, 2032, the day before the purchase. the straight-line method is used to amortize any bond discount.

answer is complete but not entirely correct.

complete this question by entering your answers in the tabs below.

req 1 and 2 req 3 req 4

prepare the journal entry to record the bond retirement.

no date general journal debit credit
1 january 01 bonds payable 430,000
loss on retirement of bonds 27,925
discount on bonds payable 7,500
cash 450,425

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Explanation:

Step1: Calculate total bond discount

$\text{Total Discount} = \$430,000 - \$417,100 = \$12,900$

Step2: Calculate annual discount amortization

$\text{Annual Amortization} = \frac{\$12,900}{15} = \$860$

Step3: Calculate amortized discount after 6 years

$\text{Amortized Discount} = \$860 \times 6 = \$5,160$

Step4: Calculate unamortized discount

$\text{Unamortized Discount} = \$12,900 - \$5,160 = \$7,740$

Step5: Calculate loss on bond retirement

$\text{Loss} = \$450,425 - (\$430,000 - \$7,740) = \$28,165$

Answer:

No	Date	General Journal	Debit	Credit
		Loss on retirement of bonds	28,165
		Discount on bonds payable		7,740
		Cash		450,425