When a bond is retired early, a gain on redemption is recorded when the cash paid is less than the carrying amount.

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When a bond is retired early, a gain on redemption is recorded if the cash paid is less than the carrying amount of the bond. This is because the carrying amount represents the bond's book value, which is often higher than the market value at the time of redemption. Therefore, if the bond is redeemed for less than its carrying amount, the company would realize a gain on the transaction.

When a Bond Is Retired Early, a Gain on Redemption