On July 1, Aloha Co

Accounting Mar 08, 2021

On July 1, Aloha Co. exercises a call option that requires Aloha to pay $244,800 for its outstanding bonds that have a carrying value of $247,800 and par value of $240,000. The company exercises the call option after the semiannual interest is paid the day before on June 30.

Record the entry to retire the bonds.

Record the retirement of bonds before maturity.

Expert Solution

Journal Entry:
Date	Account Titles and Explanation	Debit	Credit
Jul-01	Bonds Payable	$240,000
	Premium on Bonds Payable ($247800-$240000)	$7,800
	Gain on Retirement of Bonds ($247800-$244800)		$3,000
	Cash		$244,800
	(To record retirement of bond)

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