Aire Corporation retires its bonds at 106 on January 1, following the payment of annual interest.The face value of the bonds is $800,000.The carrying value of the bonds at the redemption date is $842,000.The entry to record the redemption will include a

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The premium on bonds payable account has a credit balance, meaning it represents the excess of the carrying value of the bonds over their face value. When the bonds are retired at a premium, the premium must be amortized over the life of the bonds, and any remaining unamortized premium must be debited to the premium on bonds payable account at the time of redemption. In this case, the carrying value of the bonds is $42,000 higher than their face value, so the entry to record the retirement must include a debit of $42,000 to the premium on bonds payable account.

Aire Corporation Retires Its Bonds at 106 on January 1