Question

Card Corp. purchased bonds at a discount of $49,000, and accounted for the bonds as held to maturity. Subsequently, Card sold these bonds at a premium of $12,000. During the period that Card held this investment, amortization of the discount amounted to $19,000. What amount should Card report as gain on the sale of bonds?

Answer 1

Answer:

$42,000

Explanation:

Data provided

Bonds at a discount = $49,000

Sold bonds at a premium = $12,000

Discount amount = $19,000

The computation of the sale of bonds is shown below:-

Cost + Premium - (Cost - Carrying value cost)

Carrying cost = $49,000 - $19,000

= $30,000

Sale of bonds = (Bonds at a discount + Sold bonds at a premium) - (Bonds at a discount - Carrying cost)

($49,000 + $12,000) - ($49,000 - $30,000)

= $42,000