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On January 1, 2012, Concord Corporation issued $18000000 of 9% ten-year bonds at 102. The bonds...

On January 1, 2012, Concord Corporation issued $18000000 of 9% ten-year bonds at 102. The bonds are callable at the option of Concord at 104. Concord has recorded amortization of the bond premium on the straight-line method (which was not materially different from the effective-interest method).

On December 31, 2018, when the fair value of the bonds was 95, Concord repurchased $3980000 of the bonds in the open market at 95. Concord has recorded interest and amortization for 2018. Ignoring income taxes and assuming that the gain is material, Concord should report this reacquisition as Entry field with incorrect answer

a loss of $243000.

a gain of $243000.

a loss of $291000.

a gain of $291000.

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Answer #1
Issue price (18000000/100*102) 18360000
Less: Par value of bonds $18,000,000
Premium $360,000
no of period 10
Per year amrtization 36000
For $3980000 per year amortization is
36000/18000000*3980000 7960
for 7 years (7960*7) 55720
Unamortized amt (7960*3) 23880
Dr Cr
Bonds payable 3980000
premium on bonds apaybe 23880
Gain 222880
Cash 3781000
(3980000/100*95)
Gain should be $222880 but as not the option so the closest figure is
a gain of $241000

If any doubt please comment

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