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On January 1, 2020, Siamese Inc. redeemed its 15-year, $600,000 par value bonds at 103. They...

On January 1, 2020, Siamese Inc. redeemed its 15-year, $600,000 par value bonds at 103. They were originally issued on January 1, 2008 at 98 with a maturity date of January 1, 2023. Siamese amortizes bond discounts and premiums using the straight-line method.

Ignoring income taxes, what amount of loss should Siamese recognize on the redemption of these bonds?

$39,600

$18,000

$20,400

$9,600
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Answer #1
Par value of bonds 600000
Issue price of bonds (600000*98%) 588000
Total discount 12000
Divide: Years of maturity 15
Annual amortization of discount 800
Multiply: Years expired till 01.01.20 12
Discount amortized 9600
Unamortized discount (12000-9600) 2400
Carrying value of bonds payable (600000-2400) 597600
Redemption value of bonds on 01.01.20 618000
(600000*103%)
Loss on redemption of bonds on 01.01.20 20400
Answer is $ 20400
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