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16. Bonds Payable has a balance of $852,000 and Premium on Bonds Payable has a balance...

16. Bonds Payable has a balance of $852,000 and Premium on Bonds Payable has a balance of $9,372. If the issuing corporation redeems the bonds at 103, what is the amount of gain or loss on redemption?

a. $9,372 loss

b. $16,188 loss

c. $877,560 gain

d. $9,372 gain

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Answer #1

16. Bonds Payable has a balance of $852,000 and Premium on Bonds Payable has a balance of $9,372. If the issuing corporation redeems the bonds at 103, what is the amount of gain or loss on redemption?

b. $ 16,188 loss

cash for bond redemption = 852,000 x 1.03 = $877,560
carrying value of bonds = 852,000 + 9,372 = $861,372
Gain or Loss = 877,560 - 861,372

Loss = 16,188

When bonds are redeemed; if the carrying value is more than the cash redemption, there is a gain. If the carrying value is less, there is a loss.

Here carrying value is less than the cash redemption, so it is loss on redemption.

Thank you.

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