Bonds Payable has a balance of $945,000 and Premium on Bonds Payable has a balance of $10,395. If the issuing corporation redeems the bonds at 102, what is the amount of gain or loss on redemption?

Select the correct answer.

a. $10,395 loss

b. $8,505 loss

c. $8,505 gain

d. $10,395 gain

Question

Jackson Forbes

Business

2 May, 14:22

Bonds Payable has a balance of $945,000 and Premium on Bonds Payable has a balance of $10,395. If the issuing corporation redeems the bonds at 102, what is the amount of gain or loss on redemption?

Select the correct answer.

a. $10,395 loss

b. $8,505 loss

c. $8,505 gain

d. $10,395 gain

+2

Answers (1)

Know the Answer?

Ahmad Alexander · Answer 1

The answer is b. $8,505 loss.

Explanation:

We have the Gain / (Loss) on bond redemption is calculated as:

Gain / (Loss) on redemption = Carrying value - Redemption value = (Bond Payable Balance + Bond Premium) - (Bond Payable balance * Redemption price) = (945,000 + 10,395) - (945,000 * 102%) = (8,505) which means the Redemption is recorded with a $8,505 loss

Or, the detailed journal entry for the redemption will be:

Dr Bond Payable 945,000

Dr Premium on Bonds 10,395

Dr Loss on redemption 8,505

Cr Cash 963,900

So, b is the right choice.

Bonds Payable has a balance of $945,000 and Premium on Bonds Payable has a balance of $10,395. If the issuing corporation redeems the bonds at 102, what is the amount of gain or loss on redemption?Select the correct answer.a. $10,395 lossb. $8,505 lossc. $8,505 gaind. $10,395 gain

Bonds Payable has a balance of $945,000 and Premium on Bonds Payable has a balance of $10,395. If the issuing corporation redeems the bonds at 102, what is the amount of gain or loss on redemption?

Select the correct answer.

a. $10,395 loss

b. $8,505 loss

c. $8,505 gain

d. $10,395 gain