A $375,000 bond issue on which there is an unamortized discount of $40,000 is redeemed for $320,000. Journalize the redemption of the bonds.

The Journal entry is as follows:

Bonds payable A/c Dr. $375,000

To Discount on Bonds payable $40,000

To Gain on redemption of the bonds $15,000

To Cash $320,000

(To record the redemption of the bonds)

Workings:

Gain on redemption of the bonds:

= Bonds payable - Discount on Bonds payable - Cash

= $375,000 - $40,000 - $320,000

= $15,000