Retiring bonds payable [10 min]
On January 1, 2011, Petullo,Inc., issued $300,000 of 8%, five-year bonds payable at 10.5. Petullo has extra cash and wishes to retire the bonds payable on January 1, 2012, immediately after making the second semiannual interest payment. To retire the bonds, Petullo pays the marker price of 95.
Requirements
1. What is Petullo’s carrying amount of the bonds payable on the retirement date?
2. How much cash must Petullo pay to retire the bonds payable?
3. Compute Petullo’s gain or loss on the retirement of the bonds payable.
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