Maglangit, Kerby B.

Bsais 401

On January 1,2019, BIG Corp. issued bonds with a par value of P800,000 at 97 (which is net of
issue costs), due in 20 years. Eight (8) years after the issuance date, the entire issue is called at
101 and is cancelled. The company uses the straight-line method in amortization.

Using the given information, answer the following items:

1.What is the carrying amount of the bonds redeemed? Face

Value P800,000 Unamortized discount
{P800,000 x (1-97)} = 24,000 x 12/20 (14,400) Carrying amount of the bonds
P785,600

2.What is the total loss on redemption?

Reacquisition price (P800,000 at 101)
P808,000
Less: Carrying amount of the bonds 785,600
Loss on reacquisition P 22,400

3.Prepare the entry record the reacquisition and cancellation of bonds.

Bonds Payable P800,000
Loss on reacquisition (redemption of bond) 22,400 Bonds payable
discount P 14,400 Cash
808,000