A company previously issued $2,000,000, 10% bonds, receiving a $120,000 premium. On the current year's interest date, after the bond interest was paid and after 40% of the total premium had been amortized, the company calls the bonds at $1,960,000. Prepare the journal entry to record the retirement of these bonds on January 1 of the current year.
What will be an ideal response?
| Jan 1 | Bonds Payable | 2,000,000 |
| Premium on Bonds Payable* | 72,000 |
| Cash** | 1,960,000 |
| Gain on Retirement of Bonds | 112,000 |
| Par value of bonds | $2,000,000 | ? |
| Unamortized premium | 72,000 | * |
| Carrying value of bonds | $2,072,000 | ? |
| Cash paid | 1,960,000 | ** |
| Gain on retirement | $ 112,000 | ? |
* $120,000 * 60% = $72,000
** $2,000,000 * .98 = $1,960,000
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