Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 97.5, what is the amount of gain or loss on redemption?

A) $10,000 loss
B) $25,000 loss
C) $25,000 gain
D) $15,000 gain

Question

Emely Valle · Accepted Answer

Final Answer : D, Explanation :  The carrying amount of the bonds is $1,000,000 - $10,000 = $990,000. The redemption price is 97.5% of $1,000,000, which is $975,000. The carrying amount ($990,000) is greater than the redemption price ($975,000), resulting in a gain of $15,000.

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 97.5, what is the amount of gain or loss on redemption?

A) $10,000 loss
B) $25,000 loss
C) $25,000 gain
D) $15,000 gain

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Learning Objectives

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Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 97.5, what is the amount of gain or loss on redemption?A) $10,000 lossB) $25,000 lossC) $25,000 gainD) $15,000 gain

Definitions

Learning Objectives

Learning Objectives

Related questions

Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 97.5, what is the amount of gain or loss on redemption?

A) $10,000 loss
B) $25,000 loss
C) $25,000 gain
D) $15,000 gain