(Learning Objectives 1, 3: Account for bonds payable retired prior to maturity)On January 1, 2017, Kittle Corporation issued five-year, 4% bonds payable with a face valueof $2,500,000. The bonds were issued at 95 and pay interest on January 1 and July 1. Kittleamortizes bond discounts using the straight-line method. On December 31, 2019, Kittle retiredthe bonds early by purchasing them at a market price of 97. The company’s fiscal year ends onDecember 31.Requirements1. Journalize the issuance of the bonds on January 1, 2017.2. Record the semiannual interest payment and amortization of bond discount on July 1,2017.3. Record the interest accrual and discount amortization on December 31, 2017.4. Calculate the carrying value of the bonds payable on December 31, 2019, prior to theirretirement.5. Calculate the gain or loss on the retirement of the bonds payable on December 31, 2019.Indicate where this gain or loss will appear in the financial statements.

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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(Learning Objectives 1, 3: Account for bonds payable retired prior to maturity)
On January 1, 2017, Kittle Corporation issued five-year, 4% bonds payable with a face value
of $2,500,000. The bonds were issued at 95 and pay interest on January 1 and July 1. Kittle
amortizes bond discounts using the straight-line method. On December 31, 2019, Kittle retired
the bonds early by purchasing them at a market price of 97. The company’s fiscal year ends on
December 31.
Requirements
1. Journalize the issuance of the bonds on January 1, 2017.
2. Record the semiannual interest payment and amortization of bond discount on July 1,
2017.
3. Record the interest accrual and discount amortization on December 31, 2017.
4. Calculate the carrying value of the bonds payable on December 31, 2019, prior to their
retirement.
5. Calculate the gain or loss on the retirement of the bonds payable on December 31, 2019.
Indicate where this gain or loss will appear in the financial statements.

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