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1 November, 16:05

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 t bonds at 97.5, what is the amount of gain or loss on redemption?

a. $25,000 loss

b. $ 10,000 loss

c. $25,000 gain

d. $15,000 gain

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  1. 1 November, 16:15
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    d. $15,000 gain

    Explanation:

    For computing, the loss or gain on redemption, first we have to compute the redeemable value of the bond which is shown below:

    = Bond payable balance * rate of bond

    = $1,0000,000 * 0.975

    = $975,000

    And, after the discount, the balance of bond payable would be

    = $1,000,000 - $10,000

    = $990,000

    SO, the difference would be

    = $990,000 - $975,000

    = $15,000 gain
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