On 1 May 2017,Metro Company has debentures with balances as shown below. $\begin{array}{l|r}
{\text { Debentures payable }} \
\hline & 50000
\end{array}$ $\quad\quad\begin{array}{r|}
{\text { Discount on debentures }}& \
\hline 1140
\end{array}$ If Metro redeems the debentures for $52 000,what will be the effect on the income statement?
A)There will be sales revenue of $3 140.
B)There will be a gain on redemption of $3 140.
C)There will be a loss on redemption of $3 140.
D)There will be no effect on profit.

Question

Quizplus · Accepted Answer

The debentures are redeemed at $52,000, which is higher than the net carrying amount of $48,860 ($50,000 - $1,140). This results in a loss of $3,140.

On 1 May 2017,Metro Company Has Debentures with Balances as Shown