Hogan Company has $2,000,000 of bonds outstanding.The unamortized premium is $28,800.If the company redeemed the bonds at 101, what would be the gain or loss on the redemption?
A)$8,800 gain
B)$8,800 loss
C)$20,000 gain
D)$20,000 loss

Question

Quizplus · Accepted Answer

The redemption price is 101% of $2,000,000, which is $2,020,000. The carrying amount of the bonds is $2,000,000 + $28,800 = $2,028,800. The redemption price ($2,020,000) is less than the carrying amount ($2,028,800), resulting in an $8,800 gain.

Hogan Company Has $2,000,000 of Bonds Outstanding