Question

On January 1, 2017, Flounder Corporation redeemed $510,000 of bonds at 98. At the time of redemption, the unamortized premium was $15,300.

Answer 1

Answer:

bonds payable 510,000 debit

premium on BP   15,300 debit

           cash                        499,800 credit

           gain on redemption 23,500 credit

--to record redemption of bonds--

Explanation:

cash outlay:

face value x quote:

510,000 x 98/100 = 499,800

book value:

face value + premium

510,000 + 15,300 = 523,300

Gain on redemption: 523,300 - 499,800 =23,500

To journalize we write-off the bonds payable account, we credit the cash outlay and recognize the gain