Belle Corporation retires its bonds at 105 on January 1 following the payment of annual interest. The face value of the bonds is $600000. The carrying value of the bonds at the redemption date is $621500. The entry to record the redemption will include a

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When the bonds are retired at a price higher than their carrying value, there is a loss on bond redemption. This loss is recognized as an expense in the period of redemption. Therefore, the entry to record the redemption will include a debit to Bonds Payable for the face value of the bonds ($600,000), a debit to Premium on Bonds Payable for the excess of the carrying value over the face value ($21,500), and a credit to Cash for the amount paid ($630,000). The answer choice that includes a debit to Premium on Bonds Payable is D, which is the correct answer. The other answer choices do not reflect the correct accounting treatment for bond redemption.

Belle Corporation Retires Its Bonds at 105 on January 1