Ervay Company has $3,500,000 of bonds outstanding.The unamortized premium is $50,400.If the company redeemed the bonds at 101, what would be the gain or loss on the redemption?
A)$15,400 gain
B)$15,400 loss
C)$35,000 gain
D)$35,000 loss

Question

Quizplus · Accepted Answer

The redemption price is 101% of $3,500,000, which is $3,535,000. The carrying amount of the bonds is $3,500,000 + $50,400 = $3,550,400. The difference between the carrying amount and the redemption price is $3,550,400 - $3,535,000 = $15,400, resulting in a gain.

Ervay Company Has $3,500,000 of Bonds Outstanding