A company retires its bonds at 105.The carrying value of the bonds at the date of 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 its bonds at 105, meaning it pays 105% of the face value to retire the bonds. The carrying value is $103,745, which is less than the retirement amount. The difference is a premium, so the journal entry will include a debit to Premium on Bonds to account for the additional cost over the carrying value.

A Company Retires Its Bonds at 105