Bond Retirement – Journal Entry to Retire a Bond

A bond can be retired before the maturity date or at the maturity date. The retirement of a bond means we will be closing the bond by paying out what is owed. When closing a bond at the end of the bond term, after all interest payments on the bond have been paid, is a simple journal entry. We will be left with the face amount of the bond on the trial balance after all interest payments have been made and after the amortization of the bond discount or bond premium in complete. We will debit bond payable making it go down to zero and credit cash.
A bond that is closed out before maturity results in a transaction that is more complex. Bonds that close out before maturity are callable bonds, providing the issuer the option to call the bond as some price in the future.
The journal entry to close out a bond before maturity will include a debit to bonds payable a credit to discount or a debit to premium for the amount not yet fully amortized, a credit to cash and a debit to loss or credit to gain on the transaction.
For more accounting information see accounting website.