Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $15,000. If the issuing corporation redeems the bonds at 97.5, what is the amount of gain or loss on redemption?
A) $10,000 loss
B) $25,000 loss
C) $25,000 gain
D) $10,000 gain

Question

Quizplus · Accepted Answer

The carrying amount of the bonds is $985,000 ($1,000,000 - $15,000). The redemption price is $975,000 (97.5% of $1,000,000). The gain on redemption is $10,000 ($985,000 - $975,000).

Bonds Payable Has a Balance of $1,000,000 and Discount on Bonds