Sixty million of the company's 6% bonds were retired at 102 ($61.2 million) ahead of their scheduled expiry. There was a $2 million remaining discount on the bonds at the time. Get the diary entry ready to document the bond redemption. Enter the numbers you have found, rounded to the nearest whole number (for example, 5,500,000 should be entered as 5.5). In the first account field, choose "No journal entry required" if there is no need for an entry for a transaction or occurrence.)

The company redeemed its bonds for $61.2 million, which is more than the carrying amount of the bonds.

First, we calculate the carrying amount of the bonds:

Bonds face value (to be retired): $60,000,000 Remaining discount on the bonds: $2,000,000

Carrying amount = Bonds face value - Remaining discount Carrying amount = $60,000,000 - $2,000,000 Carrying amount = $58,000,000

The loss on redemption is calculated by the amount paid over the carrying amount:

Redemption price = 102% of face value Redemption price = 1.02 × $60,000,000 Redemption price = $61,200,000

Loss on bond redemption = Redemption price - Carrying amount Loss on bond redemption = $61,200,000 - $58,000,000 Loss on bond redemption = $3,200,000

Now, we prepare the journal entry:

Debit "Bonds Payable" for the face value of the bonds: $60,000,000 Debit "Loss on Bond Redemption" for the loss calculated: $3,200,000 Credit "Discount on Bonds Payable" for the unamortized discount: $2,000,000 Credit "Cash" for the amount paid for the redemption: $61,200,000

The journal entry would look like this:

(Dr.) Bonds Payable 60.0 (Dr.) Loss on Bond Redemption 3.2 (Cr.) Discount on Bonds Payable 2.0 (Cr.) Cash 61.2

(in millions of dollars)