Hudson Corporation retires its bonds at 106 on January 1. The face value of the bonds is $600,000. The carrying value of the bonds at retirement is $619,500. The entry to record the retirement will include a:

Question

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The carrying value of the bonds is $619,500, and they are retired at 106% of face value, which is $636,000. The difference of $16,500 is a loss, not a gain. The premium on bonds payable is reduced by the difference between the carrying value and the face value, which is $19,500.

Hudson Corporation Retires Its Bonds at 106 on January 1