Question

Sandhill Company had bonds outstanding with a maturity value of $313,000. On April 30, 2017, when these bonds had an unamortized discount of $9,000, they were called in at 104. To pay for these bonds, Sandhill 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 102 (face value $313,000). Issue costs related to the new bonds were $3,000.

Ignoring interest, compute the gain or loss.

Answer 1

Answer:

bonds payable     313,000 debit

loss at redemption 21,520 debit

           discount on bonds payable   9,000 credit

           cash                                     325,520 credit

Explanation:

face value of the bons     313,000

discount                               (9,000)  

book value of the bonds 304,000

They are called at 104/100 of the face value of $313,000

that is: 325,520 dollars

we have paid 325,520 dollars for bonds worth 304,000 dollar in our accounting thus, we have a loss for 21,520 dollars