Question

A company retired $530,000 of bonds, which have an unamortized discount of $13,000, by repurchasing them for $530,000. What i

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Answer #1

There was a loss of $13000.

Solution :

If the amount paid is more than the carrying value of bonds then it is loss on retirement and if it is less then it is gain.

Where, carrying value of bond is face value of bond minus unamortised discount (plus if it unamortised premium)

Statement showing gain or loss on retirement of bonds :

Amount
Carrying value of bonds $517000*
(-) amount paid to retire bonds ($530000)
Gain/(loss) ($13000)

The negative figure indicates that it is loss of $13000 on retirement. Because, the company paid more than the carrying value of bond.

*carrying value of bond = face value - in amortised discount.

= $530000 - $13000

= $517000

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