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Alona [7]
3 years ago
12

Chang Industries has bonds outstanding with a par value of $200,000 and a carrying value of $203,000. If the company calls these

bonds at a price of $201,000, the gain or loss on retirement is_____________.
a. $1,000 gainb. $2,000 lossc. $3,000 gaind. $1,000 losse. $2,000 gain
Business
1 answer:
timurjin [86]3 years ago
4 0

Answer:

$2,000 gain

Explanation:

The carrying value of a bond is the sum of the bond's par value plus the value of the premiums that have not been paid (amortized).

Because Chang industries has called the bond at a price of $201,000, which exceed the par value of $200,000 by $1,000, but is less than the carrying value of $203,000 by $3,000, Chang industries will get a $2,000 represented by the unamortized premiums that were included in the carrying value of the bond.

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