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26 August, 10:48

Because interest rates have fallen, a company retires bonds which had been issued at their face value of $240,000. The company bought the bonds back at 96.00. The journal entry to record this retirement includes a debit of:

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  1. 26 August, 11:08
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    Dr Bonds payable 240,000

    Cr Cash 230,400

    Cr Gain on bond retirement 9,600

    Explanation:

    The face value of the bonds was $240,000 and that is the amount of the bonds payable that must be debited. The price of the bond = $240,000 x 0.96 = $230,400. The amount which the company gains for early retirement = $240,000 - $230,400 = $9,600
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