Answer:
K Co would recognize $259,000 as gain on redemption of bonds before income taxes.
Explanation:
Given information available to us -
Face value of the [email protected]% = $19,000,000 (on June 30,2018)
Unamortized bond premium = $69,000
Interest is payable semi annually on every June 30 and December 31
On June 30 K acquired all outstanding bonds at 99% from the open
market and retired them.
So for calculating the gain the first would be to calculate the face value of the bonds on June 30, 2018, which would be equal to =
Face value of the bond + unamortized bond premium
Book value of the bonds = $19,000,000 + $69,000
= $19,069,000
and now we will subtract the redemption price from the book value to see how much gain will come,
GAIN= Book value of bonds - 99% of the face value of the bonds
= $19,069,000 - $18,810,000
= $259,000
