Wayne Company issued $20,000 of callable bonds at face value on January 1, 2013. The bonds carried a 2% call premium. If Wayne calls the bonds, this event would

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When the bonds are called, Wayne must pay the bondholders the $20,000 face value of the bonds, plus a 2% call premium, or $400. The event will decrease assets (cash) by $20,400, decrease liabilities (bonds payable) by $20,000, and decrease equity (call premium) by $400.

Wayne Company Issued $20,000 of Callable Bonds at Face Value