In: Accounting
Bonds Payable has a balance of $5,000,000 and Dis- count on Bonds Payable has a balance of $150,000. If the issuing corporation redeems the bonds at 98, is there a gain or loss on the bond redemption?
Answer: | Amount paid on redemption | $ 4,900,000.00 | ||
Less: | Carrying Value of bonds | |||
Outstanding balance of bonds payable | $ 5,000,000.00 | |||
Less: Discount on issue of bonds | $ (150,000.00) | $ 4,850,000.00 | ||
Loss on redemption of bonds | $ 50,000.00 | ($4,900,000-$4,850,000) | ||
There would be loss on redemption of bonds $50,000. |