Accounting
On the balance sheet it states that bonds payable is $32,000 and Discount on bonds payable is $2000. When it says that the company retired the bond at net book value, does that mean they cashed out $30,000 and that's the amount that goes into the Cash Flow Statement or does $32,000 go in the Cash Flow Statement and $2000 under Loss on retirement of bond?
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Answers
When a bond is retired at net book value, it means that the company pays out the face amount of the bond, which in this example is $32,000. The $2,000 discount on bonds payable is considered a loss that is to be written off. Therefore, the entry that is recorded on the company's Cash Flow Statement in this case would be $32,000 in cash paid out. This would represent the full payment of the bond, both the face value and the discount.
