E14-12B

(Entry for Retirement of Bond; Bond Issue Costs)

On January 1, 2012, Ladon Corporation issued $5,000,000

of 10% bonds at 102 due December 31, 2021. Legal and other costs of $81,000 were incurred in connection with the issue. Interest

on the bonds is payable annually each December 31. The $81,000 issue costs are being deferred and amortized on a straight-line

basis over the 10-year term of the bonds. The premium on the bonds is also being amortized on a straight-line basis over the

10 years. (Straight-line is not materially different in effect from the preferable interest method.)

The bonds are callable at 105 (i.e., at 105% of face amount), and on January 2, 2017, London called one-half of the bonds and

retired them.

Instructions:

Ignoring income taxes, compute the amount of loss, if any, to be recognized by London as a result of retiring the $2,000,000 of

bonds in 2017 and prepare the journal entry to record the retirement.