A $500,000 bond was retired at 97 when the carrying amount of the bond was $495,000.The entry to record the retirement would include a
A)gain on bond redemption of $15,000.
B)loss on bond redemption of $10,000.
C)loss on bond redemption of $15,000.
D)gain on bond redemption of $10,000.

Question

Quizplus · Accepted Answer

Retiring a bond at a price lower than its carrying value results in a gain on bond redemption, while retiring a bond at a price higher than its carrying value results in a loss on bond redemption. 
In this case, the bond was retired at a price lower than its carrying value (97% of $500,000 = $485,000), but the carrying amount at that time was $495,000. Therefore, the company realized a gain of $10,000 ($495,000 - $485,000). The entry to record the retirement would credit the bond payable account for $500,000, debit the cash account for $485,000, and credit the gain on bond redemption account for $10,000.

A $500,000 Bond Was Retired at 97 When the Carrying