Question

A $283,000 bond was redeemed at 104 when the carrying value of the bond was $358,000....

A $283,000 bond was redeemed at 104 when the carrying value of the bond was $358,000. The entry to record the redemption would include a

a.loss on bond redemption of $75,000.

b.gain on bond redemption of $63,680.

c.loss on bond redemption of $63,680.

d.gain on bond redemption of $75,000.

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Answer #1

Carrying value of bonds = $358,000

Par value of bonds = $283,000

Redemption price = 104

Cash paid to redeem bonds = Par value of bonds x Redemption price

= 283,000 x 104%

= $294,320

Gain on bond redemption = Carrying value of bonds- Cash paid to redeem bonds

= 358,000-294,320

= $63,680

Correct option is b.

gain on bond redemption of $63,680.

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