Concept
Early Retirement
When bonds are retired before maturity, compare the retirement price to the carrying value. If retirement price > carrying value → Loss on retirement. If retirement price < carrying value → Gain on retirement.
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FARLesson 5 of 5
Bond Retirement & Other Liabilities
Example
Early Retirement Example
Bonds with a carrying value of $95,000 are retired by paying $98,000. Loss on retirement = $98,000 − $95,000 = $3,000. Entry: Debit Bonds Payable $100,000, Credit Discount on Bonds Payable $5,000, Debit Loss on Retirement $3,000, Credit Cash $98,000.
Key Point
Other Long-Term Liabilities
Other common long-term liabilities include mortgage payable, lease liabilities (under ASC 842), and pension obligations. Each has specific recognition, measurement, and disclosure requirements on the CPA exam.
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Practice questions from this module to reinforce what you learned.