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 journal entry to record this retirement includes a debit to Bonds Payable for $100,000 (face value of bond),a debit to Premium on Bonds Payable for $3,745 (carrying value of $103,745 − face value of $100,000),a debit to Loss on Bond Retirement for $1,255 (carrying value $103,745 − cash paid of $105,000),and a credit to Cash for $105,000 (or face value of $100,000 × call price of 1.05).

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