Question

Because interest rates have fallen, a company retires bonds which had been issued at their face value of $200,000. The company bought the bonds back at 97. The journal entry to record this retirement includes a debit of:

A) $200,000 to Bonds Payable, a credit of $6,000 to Gain on Bond Retirement, and a credit of $194,000 to Cash.

B) $194,000 to Bonds Payable, a debit to Gain on Bond Retirement of $6,000, and a credit of $200,000 to Cash.

C) $200,000 to Bonds Payable, a credit of $6,000 to Interest Expense, and a credit of $194,000 to Cash.

D) $194,000 to Bonds Payable and a credit of $194,000 to Cash.

Answer

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