Question

At December 31, 2017 the following balances existed on the books of Vaughn Manufacturing: Bonds Payable $5990000 Discount on Bonds Payable 850000 Interest Payable 155000 If the bonds are retired on January 1, 2018, at 102, what will Vaughn report as a loss on redemption? $969800 $1124800 $814800 $599000

Answer 1

Answer:

loss on redemption = $969800

so correct option is $969800

Explanation:

given data

Bonds Payable = $5990000

Discount on Bonds Payable = 850000

Interest Payable = 155000

bonds retired = 102

to find out

loss on redemption

solution

we get here loss on redemption that is express as

loss on redemption = amount paid in excess par value + discount bond payable   ........................1

here amount paid in excess par value will be

amount paid in excess par value = Bonds Payable ( 1.02- 1)

amount paid in excess par value =  $5990000 × (1.02 - 1)

amount paid in excess par value = 119800

so from equation 1

loss on redemption = $119800 + 850000

loss on redemption = $969800

so correct option is $969800