Question

A $300,000 bond was redeemed at 104 when the carrying value of the bond was $316,000. The entry to record the redemption would include a:__________(a) loss on bond redemption of $3,000(b) gain on bond redemption of $3,000(c) gain on bond redemption of $4,000(d) loss on bond redemption of $4,000

Answer 1

(c) gain on bond redemption of $4,000

Step-by-step explanation:

carrying value of bonds = $316,000

redemption value of bonds = $312,000

gain on redemption of bonds = carrying value of bonds - redemption value = $316,000 - $312,000 = $4,000

Journal entry to record redemption of bonds:

Dr Bonds payable 300,000

Dr Premium on bonds payable 16,000

Cr Cash 312,000

Cr Gain on redemption of bonds 4,000