On January 1, 2010, Jacob Issues $600,000 of 11%, 15-Year

question 13

Multiple Choice

On January 1, 2010, Jacob issues $600,000 of 11%, 15-year bonds at a price of 102½. Six years later, on January 1, 2016, Jacob retires 30% of these bonds by buying them on the open market at 98½. 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 30% of the bonds on January 1, 2016?

• A)\(\begin{array} { | c | r | r | }
• \hline \text { Bonds Payable } & 180,000 & \\
• \hline \text { Cash } & & 177,300 \\
• \hline \text { Discount on Bonds Payable } & & 2,700 \\
• \hline
• \end{array}\)
• B)\(\begin{array} { | l | r | r | }
• \hline \text { Bonds Payable } & 180,000 & \\
• \hline \text { Loss on Retirement } & 11,815 & \\
• \hline \text { Discount on Bonds Payable } & & 2,700 \\
• \hline \text { Cash } & & 177,300 \\
• \hline
• \end{array}\)
• C)\(\begin{array} { | l | r | r | }
• \hline \text { Bonds Payable } & 180,000 & \\
• \hline \text { Discount on Bonds Payable } & 2,700 & \\
• \hline \text { Gain on Retirement } & & 177,300 \\
• \hline \text { Cash } & & 5,400 \\
• \hline
• \end{array}\)
• D)\(\begin{array} { | l | r | r | }
• \hline \text { Bonds Payable } & 180,000 & \\
• \hline \text { Premium on Bonds Payable } & 2,700 & \\
• \hline \text { Gain on Retirement } & & 5,400 \\
• \hline \text { Cash } & & 177,300 \\
• \hline
• \end{array}\)
• E)\(\begin{array}{|c|c|c|}
• \hline \text { Bonds Payable } & 180,000 & \\
• \hline \text { Cash } & & 180,000 \\
• \hline
• \end{array}\)