B is corrent. The following entries would be made to record the new bond issuance and the retirement of the old issuance:
| Cash | xxx | |
| | Bonds payable (10-yr) | | xxx |
| Bonds payable (15-yr) | xxx | |
| Loss on early
retirement | xxx | |
| | Unamort. disc. on bonds pay. | | xxx |
| | Cash | | xxx |
Long-term liabilities would
therefore be increased by the excess of the 10-year bond’s face amount over the
15 year bond’s carrying amount (bonds payable less unamortized discount). Note
that the loss is not deferred.
A is incorrect. The following entries would be made to record the new bond issuance and the retirement of the old issuance:
| Cash | xxx | |
| | Bonds payable (10-yr) | | xxx |
| Bonds payable (15-yr) | xxx | |
| Loss on early
retirement | xxx | |
| | Unamort. disc. on bonds pay. | | xxx |
| | Cash | | xxx |
Long-term liabilities would
therefore be increased by the excess of the 10-year bond’s face amount over the
15 year bond’s carrying amount (bonds payable less unamortized discount). Note
that the loss is not deferred.
C is incorrect. The following entries would be made to record the new bond issuance and the retirement of the old issuance:
| Cash | xxx | |
| | Bonds payable (10-yr) | | xxx |
| Bonds payable (15-yr) | xxx | |
| Loss on early
retirement | xxx | |
| | Unamort. disc. on bonds pay. | | xxx |
| | Cash | | xxx |
Long-term liabilities would
therefore be increased by the excess of the 10-year bond’s face amount over the
15 year bond’s carrying amount (bonds payable less unamortized discount). Note
that the loss is not deferred.
D is incorrect. The following entries would be made to record the new bond issuance and the retirement of the old issuance:
| Cash | xxx | |
| | Bonds payable (10-yr) | | xxx |
| Bonds payable (15-yr) | xxx | |
| Loss on early
retirement | xxx | |
| | Unamort. disc. on bonds pay. | | xxx |
| | Cash | | xxx |
Long-term liabilities would
therefore be increased by the excess of the 10-year bond’s face amount over the
15 year bond’s carrying amount (bonds payable less unamortized discount). Note
that the loss is not deferred.
