At December 31, 2018 the following balances existed on the books of Ian Corporation: Bonds Payable$4,000,000 Premium on Bonds Payable300,000 Unamortized Bond Issue Costs200,000 If the bonds are retired on January 1, 2015, at 100, what will Ian report as a loss or gain on redemption?
$500,000 Gain
$500,000 Loss
$100,000 Gain
$100,000 Loss
Correct answer----$100,000 Loss
Bonds payable |
$ 40,00,000.00 |
Premium |
$ (3,00,000.00) |
Net bond value |
$ 37,00,000.00 |
Add: Unamortized bond issue expenses |
$ 2,00,000.00 |
Net cost of bond to company |
$ 39,00,000.00 |
Sale value (4000000/100*100) |
$ 40,00,000.00 |
Loss on redemption |
$ 1,00,000.00 |
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