EXTINGUISHMENT OF DEBT

To illustrate, assume that on January 1, 2005, General Bell Corp. issued at 97 bonds with a par value of $800,000, due in 20 years. It incurred bond issue costs totaling $16,000. Eight years after the issue date, General Bell calls the entire issue at 101 and cancels it.

At that time, the unamortized discount balance is $14,400, and the unamortized issue cost balance is $9,600

COSTS OF ISSUING BONDS:

To illustrate the accounting for costs of issuing bonds, assume that Microchip Corporation sold $20,000,000 of 10-year debenture bonds for $20,795,000 on January 1, 2012 (also the date of the bonds). Costs of issuing the bonds were $245,000. Microchip records the issuance of the bonds and amortization of the bond issue costs as follows

Presentation of Long-Term Debt: