Lowe Company has $1500000 of bonds outstanding. The unamortized premium is $19600. If the company redeemed the bonds at 101 what would be the gain or loss on the redemption?

Question

Quizplus · Accepted Answer

The gain on redemption is calculated by comparing the redemption price with the carrying amount of the bonds. The carrying amount is the face value plus unamortized premium, which is $1,500,000 + $19,600 = $1,519,600. The redemption price is 101% of the face value, which is $1,500,000 * 1.01 = $1,515,000. Therefore, the gain is the carrying amount minus the redemption price, which is $1,519,600 - $1,515,000 = $4,600.

Lowe Company Has $1500000 of Bonds Outstanding