5. (TCO D) On January 1, 2010, Goll Corp. issued 1,000 of its 10%, $1,000 bonds

Question

5. (TCO D) On January 1, 2010, Goll Corp. issued 1,000 of its 10%, $1,000 bonds for $940,000. These bonds were to mature on January 1, 2016, but were callable at 101 any time after December 31, 2013. Interest was payable annually on January 1. On Jan 1, 2015, Goll called all of the bonds and retired them. Bond discount was amortized on a straight-line basis. Before income taxes, Goll's gain or loss in 2015 on this early extinguishment of debt was (Points : 6) $8,000 gain. $16,000 gain. $40,000 loss. $20,000 loss.

Explanation / Answer

Answer $ 20,000 Loss is correct.

Working as follows

=10000*1000= 1,000,000

Issue value = 940,000

Loss = 60,000

Yearly = 60,000/6= 10,000

2015 loss= 10,000*2= 20,000

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