Question

On February 1, 2017, Pat Weaver Inc. (PWI) issued 10%, $1,000,000 bonds for $1,116,000. PWI retired all of these bonds on January 1, 2018, at 102 for total proceeds of $1,020,000. Unamortized bond premium on that date was $92,800. How much gain or loss should be recognized on this bond retirement

Answer 1

Answer:

$72,800

Explanation:

Book value:

= Value of bonds + Unamortized bond premium

= $1,000,000 + $92,800

= $1,092,800

Paid at redemption:

= 102% of value of bonds

= 102% × $1,000,000

= $1,020,000

Gain on bond retirement:

= Book value -  Paid at redemption

= $1,092,800 - $1,020,000

= $72,800

Therefore, gain should be recognized on this bond retirement will be $72,800.