Question

on january 1, 2027, shay company issues $430,000 of 8%, 15-year bonds. the bonds sell for $417500. 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. 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. view transaction list journal entry worksheet < 1 - > prepare the journal entry to record the bond retirement. note: enter debits before credits. date general journal debit credit january 01 record entry clear view general journal < previous

Explanation:

Step1: Calculate total bond discount

$\text{Total Discount} = \$430,000 - \$417,500 = \$12,500$

Step2: Calculate annual discount amortization

$\text{Annual Amortization} = \frac{\$12,500}{15} \approx \$833.33$

Step3: Calculate amortized discount over 6 years

$\text{Amortized Discount} = \$833.33 \times 6 = \$5,000$

Step4: Calculate carrying value of bonds

$\text{Carrying Value} = \$417,500 + \$5,000 = \$422,500$

Step5: Calculate loss on bond retirement

$\text{Loss on Retirement} = \$450,425 - \$422,500 = \$27,925$

Answer:

Date	General Journal	Debit	Credit
January 01	Loss on Bond Retirement	$27,925
January 01	Discount on Bonds Payable		$7,500
January 01	Cash		$450,425

(Note: The remaining unamortized discount is $\$12,500 - \$5,000 = \$7,500$, which is removed with a credit entry)