On January 1,2010,Jacob Issues $800,000 of 9%,13-Year Bonds at a Price

question 157

Multiple Choice

On January 1,2010,Jacob issues $800,000 of 9%,13-year bonds at a price of 96½.Six years later,on January 1,2016,Jacob retires 20% of these bonds by buying them on the open market at 105½.All interest is accounted for and paid through December 31,2015,the day before the purchase.The straight-line method is used to amortize any bond discount. What is the journal entry to record the retirement of 20% of the bonds on January 1,2016?

• A)
• \[\begin{array} { |l | r | r | }
• \hline \text { Bonds Payable } & 160,000 & \\
• \hline \text { Cash } & & 156,985 \\
• \hline \text { Discount on Bonds Payable } & & 3,015 \\
• \hline
• \end{array}\]
• B)
• \[\begin{array} { | l | r | r | }
• \hline \text { Bonds Payable } & 160,000 & \\
• \hline \text { Loss on Retirement } & 11,815 & \\
• \hline \text { Discount on Bonds Payable } & & 3,015 \\
• \hline \text { Cash } & & 168,800 \\
• \hline
• \end{array}\]
• C)
• \[\begin{array} { | l | r | r | }
• \hline \text { Bonds Payable } & 160,000 & \\
• \hline \text { Discount on Bonds Payable } & 3,015 & \\
• \hline \text { Cash } & & 168,800 \\
• \hline \text { Gain on Retirement } & & 5,785 \\
• \hline
• \end{array}\]
• D)
• \[\begin{array} { | l | r | r | }
• \hline \text { Bonds Payable } & 160,000 & \\
• \hline \text { Premium on Bonds Payable } & 2,585 & \\
• \hline \text { Discount on Bonds Payable } & & 3,015 \\
• \hline \text { Cash } & & 154,400 \\
• \hline
• \end{array}\]
• E)
• \[\begin{array} { | c | r | r | }
• \hline \text { Bonds Payable } & 168,800 & \\
• \hline \text { Cash } & & 168,800 \\
• \hline
• \end{array}\]

---

Definitions:

Importer

An entity that brings goods or services into a country from abroad for sale.

Proportions

Statements that two ratios are equal, showing the equivalence between two sets of numbers or measurements.

Unknown Quantities

Unknown Quantities are values in mathematical equations or problems that have not been determined or identified yet.

High-Definition Movie

A movie with a resolution that significantly exceeds that of standard-definition, providing a sharper and clearer image.