A $500,000 bond is retired at 97 when the carrying amount of the bond is $480,000. The entry to record the retirement would include a:
A) $15,000 gain.
B) $5,000 loss.
C) $2,000 gain.
D) $20,000 loss.

Question

Quizplus · Accepted Answer

The carrying amount of the bond is $480,000, which is less than the face value of $500,000. This means that if the bond is retired, the company will have to pay more than the carrying amount. Therefore, there will be a loss on retirement. The loss is calculated as follows:
Face value - Carrying amount = Loss
$500,000 - $480,000 = $20,000 loss.
Therefore, the entry to record the retirement would include a $20,000 loss. Option D is the correct choice.

A $500,000 Bond Is Retired at 97 When the Carrying