A bond with a face value of $100,000 is retired at 96. There is
still a balance in Discount on Bonds Payable of $1,200.
What is the gain or loss on the retirement of the bond?
Step-1:Calculation of carrying amount of bond | |||||
Face value | $ 1,00,000 | ||||
Less unamortized discount on bonds payable | $ 1,200 | ||||
Carrying Value | $ 98,800 | ||||
Step-2:Calculation of gain on retirement of bonds | |||||
Bonds liability | a | $ 98,800 | |||
Retirement price | b | $ 96,000 | |||
Gain on retirement of the bond | a-b | $ 2,800 | |||
Retirement price is the less than liability.So, there is gain on retirement. | |||||
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