Mandel Corp. retired bonds payable with a carrying value of $980,000. What effect does this transaction have on these accounts?
A) $$\begin{array} { | l | l | l | }
\hline \text { Total Assets } & \text { Total Liabilities } & \text { Shareholders' Equity } \
\hline \text { Decrease by } \$ 980,000 & \text { Increase by } \$ 980,000 & \text { No effect } \
\hline
\end{array}$$
B) $$\begin{array} { | l | l | l | }
\hline \text { Total Assets } & \text { Total Liabilities } & \text { Shareholders' Equity } \
\hline \text { Decrease by } \$ 980,000 & \text { Decrease by } \$ 980,00 & \text { No effect } \
\hline
\end{array}$$
C) $$\begin{array} { | l | l | l | }
\hline \text { Total Assets } & \text { Total Liabilities } & \text { Shareholders' Equity } \
\hline \text { Increase by } \$ 980,000 & \text { Decrease by } \$ 980,000 & \text { Increase by } \$ 980,000 \
\hline
\end{array}$$
D) $$\begin{array} { | l | l | l | }
\hline \text { Total Assets } & \text { Total Liabilities } & \text { Shareholders' Equity } \
\hline \text { No effect } & \text { No effect } & \text { Decrease by } \$ 980,000 \
\hline
\end{array}$$

Question

Mandel Corp. retired bonds payable with a carrying value of $980,000. What effect does this transaction have on these accounts?
A) $$\begin{array} { | l | l | l | } 
\hline \text { Total Assets } & \text { Total Liabilities } & \text { Shareholders' Equity } \
\hline \text { Decrease by } \$ 980,000 & \text { Increase by } \$ 980,000 & \text { No effect } \
\hline
\end{array}$$
B) $$\begin{array} { | l | l | l | } 
\hline \text { Total Assets } & \text { Total Liabilities } & \text { Shareholders' Equity } \
\hline \text { Decrease by } \$ 980,000 & \text { Decrease by } \$ 980,00 & \text { No effect } \
\hline
\end{array}$$
C) $$\begin{array} { | l | l | l | } 
\hline \text { Total Assets } & \text { Total Liabilities } & \text { Shareholders' Equity } \
\hline \text { Increase by } \$ 980,000 & \text { Decrease by } \$ 980,000 & \text { Increase by } \$ 980,000 \
\hline
\end{array}$$
D) $$\begin{array} { | l | l | l | } 
\hline \text { Total Assets } & \text { Total Liabilities } & \text { Shareholders' Equity } \
\hline \text { No effect } & \text { No effect } & \text { Decrease by } \$ 980,000 \
\hline
\end{array}$$

Quizplus · Accepted Answer

When bonds payable are retired, the company's liabilities decrease by the amount of the carrying value of the bonds. This transaction does not affect total assets or shareholders' equity. Therefore, the correct answer is B, where total assets and shareholders' equity remain the same, but total liabilities decrease by $980,000.

Mandel Corp B) C) D)