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KIM [24]
3 years ago
11

Blue Company had bonds outstanding with a maturity value of $270,000. On April 30, 2020, when these bonds had an unamortized dis

count of $11,000, they were called in at 105. To pay for these bonds, Blue had issued other bonds a month earlier bearing a lower interest rate. The newly issued bonds had a life of 10 years. The new bonds were issued at 102 (face value $270,000). Ignoring interest, compute the gain or loss. Loss on redemption
Business
1 answer:
topjm [15]3 years ago
4 0

Answer:

$24,500

Explanation:

Given that,

Maturity value of bonds outstanding = $270,000

Unamortized discount = $11,000 they were called in at 105.

Net carrying amount of bonds redeemed:

= Maturity value - Unamortized discount

= $270,000 - $11,000

= $259,000

Re-acquisition price:

= Maturity value × Called at 105

= $270,000 × 1.05

= $283,500

Loss on redemption:

= Re-acquisition price - Net carrying amount of bonds redeemed

= $283,500 - $259,000

= $24,500

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