I am still a bit confused...if you are using the number $248,000 to calculate the gain, wouldn't you end up with $2,000 as the gain - when in fact the gain should be $3,000?

Original Entry

Dr. Cash 494,000

Dr. Bond Issue Costs              6000

Cr.                  Bond Payable     500,000

On Retirement

Dr. Bonds Payable 250,000

Cr.            Gain on Retirement              3000

Cr.             Unamortized Bond Iss Cost  2000

Cr.              Cash                                      245,000

as rightly explained by cpayesican!

The Basis for calculation is $250,000-Unamort Bond Iss cost= $248000

(if you refer to the JE)

you need to deduct $248000 from $245000 and not $250000

$500000 X .980 X 1/2= $245000 (the retirement price)

I see...if you compare it to the cash amount as opposed to the bond payable amount then it will calculate a gain of $3,000.  I guess I really just didn't understand what the question was asking...it still seems pretty unclear.  I'll just hope I won't get a question that ambiguous on the exam...and if I do, hopefully $247,000 won't be an answer choice so I can guess correctly again!