Bonds payable are dated January 1 2016 and are issued on tha

Bonds payable are dated January 1, 2016, and are issued on that date. The face value of the bonds is $100,000, and the face rate of interest is 8%. The bonds pay interest semiannually. The bonds will mature in five years. The market rate of interest at the time of issuance was 6%. Assume that the bonds are redeemed on December 31, 2016, at 102, when carrying value was $107,019.48.

What journal entry should be recorded at the time of bond redemption? Round your answers to two decimal places. If an amount box does not require an entry, leave it blank.

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	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1	Dec. 31	Bonds Payable				1
2		Gain on Bond Redemption				2
3		Bonds Payable				3
4		Interest Payable				4

Solution

Journal Entry Date Particulars Dr. Amt Cr. Amt 31-Dec-16 Bonds Payable    100,000.00 Premium on Issue of Bonds        7,019.48 Cash    102,000.00 $100,000 X 102% Gain on Redemption of Bonds        5,019.48 $107,019.48 - $102,000 (record the redemption of Bonds)