On January 1, 2016, Goll Corp. issued 3,000 of its 10%, $1,000 bonds for $3,120,000. These bonds were to mature on January 1, 20

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3 years ago

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On January 1, 2016, Goll Corp. issued 3,000 of its 10%, $1,000 bonds for $3,120,000. These bonds were to mature on January 1, 20

26 but were callable at 101 any time after December 31, 2019. Interest was payable semiannually on July 1 and January 1. On July 1, 2021, Goll called all of the bonds and retired them. Bond premium was amortized on a straight-line basis. Before income taxes, Goll's gain or loss in 2021 on this early extinguishment of debt was

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1 answer:

attashe74 [19] · Answer 1 · 2022-09-01T13:07:30+03:00

Answer:

$24,000 gain

Explanation:

Dr Cash 3,120,000

Cr Bonds payable 3,000,000

Cr Premium on bonds payable 120,000

premium amortization per coupon = $120,000 / 20 periods = $6,000

a total of 11 coupons were paid = $6,000 x 11 = $66,000

carrying value of the bonds = $3,054,000

gain/loss on retirement of bonds = carrying value - retirement value = $3,054,000 - $3,030,000 = $24,000 gain