The retirement of a bond which has a $250,000 maturity value and a $10,000 balance in premium on bonds payable (bond premium)creates a $15,000 gain if the bond is retired at a cost of $245,000.

Question

Quizplus · Accepted Answer

The gain on retirement of bond is calculated as follows:

Consideration paid for bond = $245,000 
Maturity value of bond = $250,000 
Balance in premium on bonds payable (bond premium) = $10,000

Total amount paid by the issuer = $245,000 + $10,000 = $255,000
Gain on retirement of bond = Maturity value of bond - Total amount paid by issuer
= $250,000 - $255,000
= -$5,000 (negative value indicates a loss)

Since the result is a loss, the statement in the question is false.

The Retirement of a Bond Which Has a $250,000 Maturity