Bargain Company has $1,500,000 of bonds outstanding. The unamortized premium is $19,600. If the company redeemed the bonds at 101, what would be the gain or loss on the redemption?
A) $4,600 gain
B) $4,600 loss
C) $15,000 gain
D) $15,000 loss

Question

Quizplus · Accepted Answer

The redemption price is 101% of $1,500,000, which is $1,515,000. The carrying amount of the bonds is $1,500,000 + $19,600 = $1,519,600. The difference between the carrying amount and the redemption price is $1,519,600 - $1,515,000 = $4,600, resulting in a gain.

Bargain Company Has $1,500,000 of Bonds Outstanding