Question

Testbank Multiple Choice Question 110 On January 1, 2021, Marigold Corp. redeemed its 15-year bonds of $6920000 par value for 101. They were originally issued on January 1, 2009 at 91 with a maturity date of January 1, 2024. Marigold amortizes discounts and premiums using the straight-line method. What amount of loss should Marigold recognize on the redemption of these bonds (ignore taxes)

Answer 1

Answer:

$193,760

Explanation:

Calculation to determine the amount of loss should Marigold recognize on the redemption of these bonds

Bonds edemption=[($6,920,000*1.01)-$6,920,000]+[(100%-91%*$6,920,000)-((100%-91%*$6,920,000)/15 years*12)]

Bonds redemption=[($6,989,200-$6,920,000]+[(9%*$6,920,000)-((9%*$6,920,000)/15 years*12)]

Bonds redemption=$69,200+[($622,800-($622,800/15 years*12)]

Bonds redemption=$69,200+[($622,800-$498,240)]

Bonds redemption=$69,200+$124,560

Bonds redemption=$193,760

Therefore the amount of loss should Marigold recognize on the redemption of these bonds is $193,760