Refer to Exhibit 14-6.The journal entry to record the reacquisition of the bonds will include a

A) debit to Loss on Bond Redemption for $4, 100
B) credit to Gain on Bond Redemption for $5, 000
C) debit to Discount on Bonds Payable for $1, 100
D) debit to Loss on Bond Redemption for $4, 200

CThe reacquisition of the bonds involves settling the outstanding liability at the call price and removing the unamortized discount from the books. Since the bonds were issued at 98 (or 98% of the face value), there was an initial discount of $2,000 ($100,000 face value - $98,000 issued price). Straight-line amortization over five years means an annual amortization of $400 ($2,000 / 5 years). By April 1, 2012, 2 years and 3 months (or 27 months) have passed, so the amortized amount is $900 ($400 * 2.25 years), leaving an unamortized discount of $1,100 ($2,000 - $900). The bonds are called at 103, or $103,000, resulting in a loss because the company is paying more to reacquire the bonds than their book value. The book value of the bonds is $98,900 ($100,000 face value - $1,100 unamortized discount). The loss on bond redemption is the difference between the call price ($103,000) and the book value ($98,900), which is $4,100.