Bonds Payable has a balance of $1,010,000 and Discount on Bonds Payable has a balance of...

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Bonds Payable has a balance of $1,010,000 and Discount on Bonds Payable has a balance of...

Bonds Payable has a balance of $1,010,000 and Discount on Bonds Payable has a balance of $12,120. If the issuing corporation redeems the bonds at 98, what is the amount of gain or loss on redemption?

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Answer 1

Answer #1

Face Value of Bonds = $1,010,000
Unamortized Discount on Bonds Payable = $12,120

Carrying Value of Bonds = Face Value of Bonds - Unamortized Discount on Bonds Payable
Carrying Value of Bonds = $1,010,000 - $12,120
Carrying Value of Bonds = $997,880

Cash Paid at Redemption = 98% * Face Value of Bonds
Cash Paid at Redemption = 98% * $1,010,000
Cash Paid at Redemption = $989,800

Gain on Redemption of Bonds = Carrying Value of Bonds - Cash Paid at Redemption
Gain on Redemption of Bonds = $997,880 - $989,800
Gain on Redemption of Bonds = $8,080

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Answer 2

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