Question

A corporation retired $670,000 face value of bonds, which have an unamortized discount of $27,000, by repurchasing them for $670,000. How much was the gain or loss on the retirement of the bonds

Answer 1

Answer:

$27,000 loss

Explanation:

gain/loss on retirement of bonds = carrying value - retirement cost

• carrying value = $670,000 - $27,000 = $643,000
• retirement cost = $670,000

gain/loss on retirement of bonds = $643,000 - $670,000 = -$27,000

Dr Bonds payable 670,000

Dr Loss on retirement of bonds 27,000

    Cr Cash 670,000

    Cr Discount on bonds payable 27,000