Answer:
B. credit of $4,200 to Gain on Bond Redemption
Explanation:
face value 400,000
callable at 106
cash disbursements 400,000 x 1.06 = 424,000
carrying value (after discount or premium) 419,800
as is higher than face value the onds have a premium for 19,800 dollars
result at redemption:
book value - market value
419,800 - 424,000 = 4,200
Journal entry
Bonds Payable 400,000 debit
Premium on BP 19,800 debit
Cash 424,000 credit
Gain on Bond of Redemption 4,200 credit
This makes B option correct.
