Answer:
The loss is $63,000.
Explanation:
The loss on the retirement of bond is the difference between the retirement value of the bond and the book value of the bond. It is calculated as follows.
Calculation of loss on retirement of bond:
Retirement value of bonds ($1,000,000 x 102 / 100) $1,020,000
Interest payment ($1,000,000 x 10% x 6/12) $50,000
Interest expense ($950,000 x 12% x 6/12) $57,000
Amortization of bond discount ($57,000 - $50,000) $7,000
Debit balance in bond discount ($50,000 - $7,000) $43,000
Credit balance in accounts payable $1,000,000
Book value of bond ($1,000,000 - $43,000) $957,000
Loss on retirement of bond ($1,020,000 - $957,000) $63,000
