Hogan Company has $1,000,000 of bonds outstanding. The unamortized premium is $14,400. If the company redeemed the bonds at 101, what would be the gain or loss on the redemption?
A) $4,400 gain
B) $4,400 loss
C) $10,000 gain
D) $10,000 loss

Question

Quizplus · Accepted Answer

The carrying amount of the bonds is $1,014,400 ($1,000,000 + $14,400). The redemption price is $1,010,000 ($1,000,000 * 101%). The carrying amount is higher than the redemption price, resulting in a gain of $4,400 ($1,014,400 - $1,010,000).

Hogan Company Has $1,000,000 of Bonds Outstanding