Exhibit 14-11
Omega, Inc. issued $100,000 of its 7% five-year bonds on January 1, 2014, at 98. Interest is paid on January 1 and
July 1. The bonds are callable at 104 and straight-line amortization is used. The bonds are recalled on April 1, 2016.
-Refer to Exhibit 14-11. The journal entry to record the reacquisition of the bonds will include a

Question

Quizplus · Accepted Answer

CThe journal entry to record the reacquisition of the bonds will include a debit to Loss on Bond Redemption and a debit to Discount on Bonds Payable. The bonds were issued at a discount (98% of face value), so the discount needs to be amortized over the life of the bond. Since the bonds are being recalled before their maturity date, any remaining unamortized discount must be accounted for at the time of reacquisition. Additionally, the difference between the reacquisition price and the net carrying amount of the bonds (including any unamortized discount) will result in a loss if the reacquisition price is higher.

Exhibit 14-11 Omega, Inc. Issued $100,000 of Its 7% Five-Year Bonds on Bonds