Question

A company called and redeemed a $500,000, 7% bond issue at 98. If the unamortized discount is $4,000, the entry will include a:________

a. Debit to loss on bond retirement for $6,000
b. Credit to gain on bond retirement for $6,000
c. Debit to loss on bond retirement for $4,000
d. Credit to gain on bond retirement for $4,000

Answer 1

Answer:

Option B

Explanation:

Bonds payable will be debited because it was a liability to be paid when we issue bonds we debit the cash and credit the bonds payable. gain on redemption, discount and cash will be credited.

B. Credit to gain on bond retirement for $6,000  

Dr Bonds Payable                           500,000

Cr Gain on retirement                                     6,000

Cr Discount on Bonds Payable                     4,000

Cr Cash                                                             490,000