issued $400,000 of 10-year bonds at a discount. Prior to maturity, when the carrying value of the bonds was $388,000, the company redeemed the bonds at 99. Prepare the entry to record the redemption of the bonds.

Dr Bonds Payable$400,000

Dr Loss on retirement of bonds$12,000

Cr Cash $396,000

Cr Discount on bonds$16,000

Explanation:

Preparation of the journal entry to record the redemption of the bonds.

Dr Bonds Payable$400,000

Dr Loss on retirement of bonds$12,000

($400,000-$388,000)

Cr Cash $396,000

($400,000 *99% = $396,000)

Cr Discount on bonds$16,000

($400,000+$12,000-$396,000)

(To record the redemption of the bonds)