Question

Tyrell Company issued callable bonds with a par value of $10,000. The call option requires Tyrell to pay a call premium of $500 plus par (or a total of $10,500) to bondholders to retire the bonds. On July 1, Tyrell exercises the call option. The call option is exercised after the semiannual interest is paid the day before on June 30. Record the entry to retire the bonds under each separate situation.
(1) The bonds have a carrying value of $9,000.
(2) The bonds have a carrying value of $11,000.

Answer 1

Answer:

Explanation:

Tyrell company

Journal entries

Jul-01

Dr Bonds Payable $10000  

Dr Loss on retirement $1,500  

  Cr Discount on Bonds Payable [10000 - 9000]  $1,000

  Cr Cash [10000 + 500]  $10,500

Jul-01

Dr Bonds Payable $10,000  

Dr Premium on Bonds Payable [11000 - 10000] $1,000  

  Cr Gain on retirement of bonds  $500

  Cr Cash [10000 + 500]  $10,500