A $287,000 bond was redeemed at 104 when the carrying value of the bond was $345,000....

Question

Question

A $287,000 bond was redeemed at 104 when the carrying value of the bond was $345,000. The entry to record the redemption would include a

a.gain on bond redemption of $46,520.

b.loss on bond redemption of $46,520.

c.loss on bond redemption of $58,000.

d.gain on bond redemption of $58,000.

Answer 1

Answer #1

Solution:

Option (a) is Correct i.e., gain on bond Redemption of $46,520

Reason:

Calculation of Gain or Loss on Redemption of Bonds

Gain or Loss on Redemption = Carrying Value of Bonds - Amount paid to retire the Bonds

Gain or Loss on Redemption = $345,000 - ($287,000 * 104%)

Gain or Loss on Redemption = $345,000 - $298,480

Gain on Redemption = $46,520

Since, the balance between the two is positive so there is a Gain on Redemption of Bonds

Answer 2

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