Answer:
The amount of loss on early extinguishment is $8677.5
Explanation:
In determining the loss on the early retirement of bond,we need to ascertain the carrying value of the bond to the company as at when bonds were extinguished.
The carrying value =book value+interest expense(based on book value)-coupon interest (based on face value)
book value=$966,500
interest expense=$966,500*13%/2=$62,822.50
coupon payment=$1,000,000*11%/2=$55,000
carrying amount=$966,500+$62,822.50-$55,000=$974322.5
loss on redemption=amount paid-carrying value
amount paid on redemption was $983,000
loss on redemption=$983,000-$974,322.5
=$8677.5
