Answer :
Sheridan company has $2800000 of bonds outstanding. The unamortized premium is $40300. If the company redeemed the bonds at 101, then there would be a gain redemption of $12300
To calculate the gain or loss redemption follow the following steps first add bonds outstanding and unamortized premium then subtract the amount with cash to find the cash, multiply the bond outstanding by 1.01 then subtract both the numbers the difference between the numbers will be a gain or loss redemption if the amount on debit side is greater than the amount on credit side before subtracting the numbers then it is gain redemption and vice versa.
According to the question(($2800000 + 40300) - (2800000 * 1.01)) = 12300 the journal entry of the following will be:
Bonds payable (Debit) $2800000
Unamortized premium (Debit) $40300
Gain on redemption (Credit) $12300
Cash (2800000*1.01) (Credit) $2828000
Therefore the gain redemption is $12300
If you are taking the redemption proceeds and subtracting what you, in the beginning, paid for the bond, then the difference will inform you of the answer. If it's positive, you then have a gain. If it is negative, you've got lost cash at the bond.
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