A company retires its bonds at 105.The carrying value of the bonds at the date of its retirement is $103,745.The issuer's journal entry to record the retirement will include a:
A)Debit to Premium on Bonds.
B)Credit to Premium on Bonds.
C)Debit to Discount on Bonds.
D)Credit to Gain on Bond Retirement.
E)Credit to Bonds Payable.

Question

Quizplus · Accepted Answer

The company retires the bonds at a premium (105% of face value), which means the bonds are retired at a higher price than their carrying value. The difference between the retirement price and the carrying value is recorded as a debit to Premium on Bonds.

A Company Retires Its Bonds at 105