sashkacpa, I agree with you that gain/loss should be recognized in the market value method, and bonds and related accounts must be written off, but I don't think in this method APIC is a plug. When it's the market value method, APIC should equal the FV and par value of the stock, bringing the C/S to FV, and GAIN/LOSS is the plug.

example J/E:

Bonds Payable          ; XX

Unamortized premium XX

          unamortized bond issue cost XX

                    C/S @par         &n bsp;      XX

                    APIC (FV-par)          XX

                    Gain (Plug)               XX

which means the gain/loss is the difference between the FV of C/S and the carrying value of the bond payable.

Whereas in the book value method, APIC is the plug.