When a company retires bonds before maturity the gain or loss on redemption is the difference between the cash paid and the
A) carrying value of the bonds.
B) face value of the bonds.
C) original selling price of the bonds.
D) maturity value of the bonds.

Question

Quizplus · Accepted Answer

The carrying value of the bonds is the amount at which the bonds are recorded on the balance sheet, which includes any unamortized premiums or discounts on the bonds. When the company retires the bonds, the gain or loss on redemption is calculated as the difference between the cash paid and the carrying value of the bonds. The carrying value of the bonds represents the amount of the bond's principal that has been amortized and is currently outstanding. When a company retires bonds before maturity, they must pay the carrying value of the bonds plus any applicable call premium. The gain or loss on redemption is the difference between the cash paid and the carrying value of the bonds.

When a Company Retires Bonds Before Maturity the Gain or Loss