On 15 October 2016,Rural Sales has a debenture with balances as shown below. $\begin{array}{c|r}
{\text { Debentures payable }} \
\hline & 80000
\end{array}\quad\quad$$\begin{array}{l}
\text { Premium on debentures }\
\begin{array}{lll|l}
\hline 4600&&&&&& \

\end{array}
\end{array}$ If Rural Sales wishes to redeem the debentures for $82 000,what will be the effect on the income statement?
A)Loss on redemption of $2 600
B)Loss on redemption of $2 000
C)Gain on redemption of $2 600
D)Gain on redemption of $2 000

Question

On 15 October 2016,Rural Sales has a debenture with balances as shown below. $\begin{array}{c|r}
{\text { Debentures payable }} \
\hline & 80000
\end{array}\quad\quad$$\begin{array}{l}
\text { Premium on debentures }\
\begin{array}{lll|l}
\hline 4600&&&&&& \

\end{array}
\end{array}$ If Rural Sales wishes to redeem the debentures for $82 000,what will be the effect on the income statement?
A)Loss on redemption of $2 600
B)Loss on redemption of $2 000
C)Gain on redemption of $2 600
D)Gain on redemption of $2 000

Quizplus · Accepted Answer

The redemption of the debentures will result in a gain on redemption of $2,600. This is because the debentures are being redeemed for $82,000, which is $2,600 more than the carrying value of the debentures ($80,000). The gain on redemption will be reported on the income statement as other income.

On 15 October 2016,Rural Sales Has a Debenture with Balances Debentures payable 80000\begin{array}{c|r}{\text { Debentures payable }} \\\hline & 80000\end{array}\quad\quad Debentures payable ​80000​​

On 15 October 2016,Rural Sales Has a Debenture with Balances $\begin{array}{c|r}{\text { Debentures payable }} \\\hline & 80000\end{array}\quad\quad$