Question

On April 30, one year before maturity, Middleton Company retired $200,000 of its 9% bonds payable at the current market price of 101 (101% of the bond face amount, or $200,000 1.01 3 5 $202,000). The bond book value on April 30 is $196,600, reflecting an unamortized discount of $3,400. Bond interest is currently fully paid and recorded up to the date of retirement. What is the gain or loss on retirement of these bonds

Answer 1

Answer:

Loss on retirement of these bonds = $5,400

Explanation:

Particulars                               Amount

Amount paid                          $202,000

Book value of bonds             $196,600

Loss on retirement of bonds $5,400

However, this is not a real economic gain