On January 1, 2018, Plummer Company issued $250,000 of 4%, five-year bonds payab
ID: 2565787 • Letter: O
Question
On January 1, 2018, Plummer Company issued $250,000 of 4%, five-year bonds payable at 102. Plummer Company has extra cash and wishes to retire the bonds payable on January 1, 2019, immediately after making the second semiannual interest payment. To retire the bonds, Plummer pays the market price of 90.
1.
What is Plummer Company's carrying amount of the bonds payable on the retirement date?
2.
How much cash must Plummer Company pay to retire the bonds payable?
3.
Compute Plummer Company's gain or loss on the retirement of the bonds payable.
1.
What is Plummer Company's carrying amount of the bonds payable on the retirement date?
2.
How much cash must Plummer Company pay to retire the bonds payable?
3.
Compute Plummer Company's gain or loss on the retirement of the bonds payable.
On January 1, 2018, Plummer Company issued $250,000 of 4%, five-year bonds payable at 102. Plummer Company has extra cash and wishes to retire the bonds payable on January 1, 2019, immediately after making the second semiannual interest payment. To retire the bonds, Plummer pays the market price of 90 zation method.) Requirements retirement date? 1. What is Plummer Company's carrying amount of the bonds payable on the retirement date? 2. How much cash must Plummer Company pay to retire the bonds payable? 3. Compute Plummer Company's gain or loss on the retirement of the bonds payable. PrintDoneExplanation / Answer
Premium on bonds = 250000*2% = 5000 Premium amortized till Jan 1 2019 = 5000/10*2 = 1000 1 Carrying amount of the bonds payable on the retirement date = 250000+(5000-1000) = 254000 2 Cash paid to retire the bonds payable = 250000*90%= 225000 3 Gain on the retirement of the bonds payable = 254000-225000= 29000
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