Casey Company retired $500,000 face value, 9% bonds on June 30, 2018 at 96. The carrying value of the bonds at the redemption date was $508,000. Prepare the journal entry to record the redemption of the bonds.

Dr Bonds Payable $500,000

Dr Premium on Bonds Payable $8,000

Cr Gain on Bond Redemption $28,000

Cr Cash $480,000

Explanation:

Preparation of the journal entry to record the redemption of the bonds.

Dr Bonds Payable $500,000

Dr Premium on Bonds Payable $8,000

($508,000-$500,000)

Cr Gain on Bond Redemption $28,000

($500,000+$8,000-$480,000)

Cr Cash $480,000

($500,000 × 96%)

(To record the redemption bonds)