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7 October, 05:33

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

+4
Answers (1)
  1. 7 October, 08:47
    0
    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.
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Home » Business » 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.
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