Question

Bonds Payable has a balance of $928,000 and Discount on Bonds Payable has a balance of $11,136. If the issuing corporation redeems the bonds at 98, what is the amount of gain or loss on redemption?

a.$11,136 loss
b.$7,424 loss
c.$7,424 gain
d.$11,136 gain

Answer 1

Answer:

c.$7,424 gain

Explanation:

Book value of bonds payable:    

Par value of bonds payable                      $928,000  

Less: Discount on bonds payable              $11,136  

Book value of bondds payable               $916864  

Redemption value of bonds ($928,000*98%)   $909440  

Gain on Redemption of bonds                 $7424

Therefore, The amount of gain or loss on redemption is $7424.