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Bonds Payable has a balance of $5,000,000, and Discount on Bonds Payable has a balance of $50,000. If the issuing corporation redeems the bonds at 98, is there a gain or loss on the bond redemption?
Accounting (Text Only)
Solutions
Accounting (Text Only)
Bonds Payable has a balance of $5,000,000, and Discount on Bonds Payable has a balance of $50,000. If the issuing corporation redeems the bonds at 98, is there a gain or loss on the bond redemption?
Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.
Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.
To compute: Gain or loss on the redemption of the bonds payable.
Explanation of Solution
Determine the gain or loss on the redemption of the bonds payable.
Step 1: Calculate carrying amount of bonds payable on the redemption date.
Step 2: Determine the amount of cash paid to redeem the bonds payable.
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