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Bonds Payable has a balance of $900,000 and Premium on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 103, what is the amount of gain or loss on redemption?A) $1,200 lossB) $1,200 gainC) $17,000 lossD) $17,000 gain

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abiolataiwo2015

Answer:

c.$17,000 loss

Explanation:

Calculation for the amount of gain or loss on redemption

First step

cash for bond redemption=900,000 x 1.03

cash for bond redemption= $927,000

Second step

carrying value of bonds=900,000 + 10,000

carrying value of bonds= $910,000

loss on redemption =927,000 - 910,000 =$17,000 loss

Therefore the amount of loss on redemption is $17,000