A company has bonds outstanding with a face value of $100,000. The unamortized p

Question

A company has bonds outstanding with a face value of $100,000. The unamortized premium on these bonds is $2,700. If the company retired these bonds at a call price of 99, the journal entry to record this retirement includes a debit to:

A) Bonds Payable for $100,000, a debit to Premium on Bonds Payable for $2,700, a credit to Cash for $99,000, and a credit to Gain on Bond Retirement for $3,700.

B) Bonds Payable for $100,000, a debit to Loss on Bond Retirement for $1,700, a credit to Cash for $99,000, and a credit to Premium on Bonds Payable for $2,700.

C) Bonds Payable for $100,000, credit to Cash for $99,000, and a credit to Gain on Bond Retirement for $1,000.

D) Bonds Payable for $100,000, a debit to Loss on Bond Retirement for $1,673, and a credit to Cash for $101,673.

Explanation / Answer

Debit to Bonds Payable for $100,000, a debit to Premium on Bonds Payable for $2,700, a credit to Cash for $99,000, and a credit to Gain on Bond Retirement for $3,700. Option A is correct

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