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 carrying value of the bonds at the redemption date is $829,960, which is higher than the face value of $800,000. This suggests that the bonds were sold at a premium, and the premium was amortized over the life of the bonds. When the bonds are retired, the premium needs to be written off. The premium on bonds payable is a contra account to the bonds payable and has a credit balance. To write off the premium, we need to debit the premium account. However, since the carrying value exceeds the face value, we also need to recognize a loss on bond redemption. The loss is the difference between the carrying value and face value, which is $29,960. Therefore, the entry to record the redemption will include a debit of $2,040 to Loss on Bond Redemption (which is the $29,960 loss divided by the 5-year life of the bonds times 1 year) and a debit of $32,000 to Premium on Bonds Payable.

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