$5,000 (face value)of bonds with a book value of $4,300 was retired 4 years and 9 months prior to maturity.The dollar amount (excluding interest)paid to retire the bonds was $4,700.The entry to record the retirement would include:
A)dr.bonds payable $5,000
B)cr.unusual gain $400
C)dr.bonds payable $4,700
D)cr.cash $4,300

Question

Quizplus · Accepted Answer

BWhen bonds are retired, the entry should remove the bonds payable at their face value, which is $5,000 in this case, hence option A is correct. The difference between the book value and the amount paid to retire the bonds ($4,700 - $4,300 = $400) is recorded as a gain, but since this transaction is not part of the company's usual operations, it is classified as an unusual gain, making option B correct.

$5,000 (Face Value)of Bonds with a Book Value of $4,300