A Company Issued $1,000,000 of 30-Year, 8% Callable Bonds on April

A company issued $1,000,000 of 30-year, 8% callable bonds on April 1, with interest payable on April 1 and October 1. The fiscal year of the company is the calendar year. The bonds are called at the end of year 3 for 104. What is the entry to record the redemption? (Assume the interest payment has been recorded separately.)

A)
$\begin{array} { l r r } \text { Bonds Payable } & 1,000,000 & \\\text { Gain on Redemption of Bonds } & 40,000 & \\\quad \text { Cash } & & 1,040,000\end{array}$
B)
Bonds Payable $\quad 1,000,000$
Loss on Redemption of Bonds $\quad 40,000$
Cash $\quad$$\quad$$\quad$$1,040,000$
C)
Bonds Payable $\quad$ $1,000,000$
Cash $\quad$$1,000,000$
D) $\begin{array} { l r } \text { Bonds Payable } & 1,040,000 \\\text { Cash } & 1,000,000 \\\text { Loss on Redemption of Bonds } & 40,000\end{array}$

Correct Answer:

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