Because interest rates have fallen, a company retires bonds which had been issue

Question

Because interest rates have fallen, a company retires bonds which had been issued at their face value of $320,000. The company bought the bonds back at 96.50. The journal entry to record this retirement includes a debit of O $320,000 to Bonds Payable, a credit of $11 200 to Interest Expense, and a credit of $308,800 to Cash. O $308,800 to Bonds Payable and a credit of $308,800 to Cash. $308,800 to Bonds Payable, a debit to Gain on Bond Retirement of $11,200 and a credit of $320,000 to Cash $320,000 to Bonds Payable, a credit of $11,200 to Gain on Bond Retirement, and a credit of $308,800 to Cash

Explanation / Answer

Journal entry to record retirement of bond

Bonds payable $308800

To cash $308800

$320000 / 100 = 3200 bonds

3200 bonds * $96.50 = $308800.

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