Question

Clabber company has bonds outstanding with a par value of $100,000 and a carrying value of $97,300. if the company calls these bonds at a price of $95,000, the gain or loss on retirement is

Answer 1

Gain or loss = book value of the bonds- the amount paid to the bond hold

Gain or loss = $97,300 - $ 95,000 = $ 2300

The book value of the bond = face value of the bond+ Unamortized premium

                                    =$100,000+$x= $2300