Lark Corporation retires its $800,000 face value bonds at 104 on January 1, following the payment of annual interest. The carrying value of the bonds at the redemption date is $829,960. The entry to record the redemption will include a

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The difference between the carrying value ($829,960) and the redemption amount ($800,000 x 104% = $832,000) is a loss on redemption of $2,040. This loss needs to be recorded with a debit to Loss on Bond Redemption. The premium on bonds payable would have been recorded as a credit balance on the balance sheet, but it is not affected by the redemption and therefore does not require an entry.

Lark Corporation Retires Its $800,000 Face Value Bonds at 104