Determining Gain or Loss on Bond Redemption On January 1, 2016, two years before

Question

Determining Gain or Loss on Bond Redemption On January 1, 2016, two years before maturity, Easton Company retires $200,000 of its 9% bonds payable at the current market price of 101 (101% of the bond face amount, or $200,000 x 1.01 = $202,000). The bond book value on January 1, 2016 is $197,600 reflecting an unamortized discount of $2,400. Bond interest is presently fully paid and recorded up to the date of retirement. What is the gain or loss on retirement of these bonds? | $ (4,400) X Loss Check

Explanation / Answer

Gain or (Loss) on the Retirement of Those Bonds = (Book Value of Bond - Current Market Value Bond) - Unamoritized Discount on bonds

= ($ 197,600 - $ 202,000) - $ 2400

= - $ 4,400 - $ 2,400

= - $ 6,800 or ($ 6,800)

There will be Loss of $ 6,800 on the early retirement of these bond

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