Carr Corporation retires its $100,000 face value bonds at 105 on January 1, foll
ID: 2428284 • Letter: C
Question
Carr Corporation retires its $100,000 face value bonds at 105 on January 1, following the payment of interest. The carrying value of the bonds at the redemption date is $103,745. The entry to record the redemption will include a
A)
credit of $3,745 to Loss on Bond Redemption.
B)
debit of $3,745 to Premium on Bonds Payable.
C)
credit of $1,255 to Gain on Bond Redemption.
D)
debit of $5,000 to Premium on Bonds Payable.
A)
credit of $3,745 to Loss on Bond Redemption.
B)
debit of $3,745 to Premium on Bonds Payable.
C)
credit of $1,255 to Gain on Bond Redemption.
D)
debit of $5,000 to Premium on Bonds Payable.
Explanation / Answer
A) It is a loss because, they should have been redeemed at $100,000 FV Dr. Bonds Payable 103,745 Cr. Cash 105,000 Dr. Premium on Bond Payable 5,000 Cr. Loss on Bond Redemption 3,745