Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $10,000. 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) $15,000 gain

Question

Quizplus · Accepted Answer

The carrying amount of the bonds is $1,000,000 - $10,000 = $990,000. The redemption price is 97.5% of $1,000,000, which is $975,000. The carrying amount ($990,000) is greater than the redemption price ($975,000), resulting in a gain of $15,000.

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