A company retires its bonds with a face value of $100,000 at 105.The carrying value of the bonds at the retirement date is $103,745.The journal entry to record this retirement will include a:
A)debit to Premium on bonds payable.
B)credit to Gain on bond retirement.
C)credit to Bonds payable.
D)debit to Discount on bonds payable.

Question

Quizplus · Accepted Answer

The bonds are retired at a premium (105% of face value), so the company pays $105,000. The carrying value is $103,745, indicating a premium of $1,255 ($105,000 - $103,745). Therefore, the journal entry will include a debit to Premium on bonds payable to account for this premium.

A Company Retires Its Bonds with a Face Value of $100,000