Because interest rates have fallen, a company retires bonds which had been issued at their face value of $370,000. The company bought the bonds back at 95.25. The journal entry to record this retirement includes a debit of:

Multiple Choice

• $370,000 to Bonds Payable, a credit of $17,575 to Gain on Bond Retirement, and a credit of $352,425 to Cash.

• $352,425 to Bonds Payable, a debit to Gain on Bond Retirement of $17,575 and a credit of $370,000 to Cash.

• $370,000 to Bonds Payable, a credit of $17,575 to Interest Expense, and a credit of $352,425 to Cash.

• $352,425 to Bonds Payable and a credit of $352,425 to Cash.