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:
A. $308,800 to Bonds Payable and a credit of $308,800 to Cash.
B. $320,000 to Bonds Payable, a credit of $11,200 to Interest Expense, and a credit of $308,800 to Cash.
C. $308,800 to Bonds Payable, a debit to Gain on Bond Retirement of $11,200 and a credit of $320,000 to Cash.
D. $320,000 to Bonds Payable, a credit of $11,200 to Gain on Bond Retirement, and a credit of $308,800 to Cash.
Answer: D
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