Lopez Plastics Co. (LPC) issued callable bonds on January 1, 2018. LPC\'s accoun

Question

Lopez Plastics Co. (LPC) issued callable bonds on January 1, 2018. LPC's accountant has projected the following amortization schedule from issuance until maturity: CashEffective Decrease in Outstanding nterest interest Date balance balance 1/1/2018 6/30/2018 7,0006,211 12/31/2018 7,000 6,187 6/30/2019 7,000 6,163 12/31/2019 7,000 6,137 6/30/2020 7,000 6,112 12/31/2020 7,000 6,085 6/30/2021 7,000 6,057 12/31/2021 7,00O 6,029 207,020 206,230 205,417 204,580o 203,717 202,829 201,913 200,971 200,000 789 813 837 863 915 943 971 LPC calls the bonds at full face value immediately after the interest payment on 12/31/2019 and retires them. What gain or loss, if any, would LPC record on this date?

Explanation / Answer

Carrying value of bonds on 12/31/2019 = 203717

Call value = 200000

Gain on retirement = 203717-200000 = 3717

so answer is c) $3717 gain

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