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6 May, 2015 - 17:10

When a company is able to redeem bonds at a price above the carrying amount, a loss is incurred. This requires an entry that debits Bonds Payable and a Loss on Redemption of Bonds, and credits Cash. If any unamortized premium remains, this amount must also be debited. Unamortized premiums increase the cash payment required for bond redemptions. If a bond is redeemed at a price below the carrying amount, a gain has been realized. The Gain on Redemption of Bonds account is credited in such circumstances.