Question

In: Accounting

Bonds Payable has a balance of $5,000,000 and Dis- count on Bonds Payable has a balance...

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?

Solutions

Expert Solution

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.

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