Question

Bonds Payable has a balance of $928,000 and Discount on Bonds Payable has a balance of $11,136. If the issuing corporation redeems the bonds at 98, what is the amount of gain or loss on redemption?

a.$11,136 loss
b.$7,424 loss
c.$7,424 gain
d.$11,136 gain

Answer 1

c.$7,424 gain

Step-by-step explanation:

Book value of bonds payable:

Par value of bonds payable $928,000

Less: Discount on bonds payable $11,136

Book value of bondds payable $916864

Redemption value of bonds ($928,000*98%) $909440

Gain on Redemption of bonds $7424

Therefore, The amount of gain or loss on redemption is $7424.