The Titan retires a $20 million bond issue when the carrying value of the bonds is $18 million,but the market value of the bonds is $23 million.The entry to record the retirement will include:

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The carrying value of the bonds is $18 million, which means the company only owes $18 million to its bondholders. However, the market value of the bonds is $23 million, which means the bondholders could sell their bonds for $23 million on the open market. Since the company is retiring the bonds early, it will have to pay more than the carrying value to buy back the bonds from the bondholders. Therefore, the company will incur a loss of $5 million ($23 million market value - $18 million carrying value), and the entry to record the retirement will include a debit of $5 million to a loss account.

The Titan Retires a $20 Million Bond Issue When the Carrying