### Bond Retirement CalculationA corporation issued 8% bonds with a par value of $1,230,000, receiving a $66,000 premium. On the interest date 5 years later, after the bond interest was paid and after 40% of the premium had been amortized, the corporation called the bonds at $1,217,700. The gain or loss on this retirement is:#### Multiple Choice Options:- **$51,900 gain.**- **$12,300 loss.**- **$12,300 gain.**- **$0.**- **$51,900 loss.**### Explanation:To determine the gain or loss on the retirement of the bonds, follow these steps:1. **Calculate the carrying amount of bonds at the time of retirement:** - Initial Premium on Bonds: $66,000 - Amount of Premium Amortized in 5 years: $66,000 × 40% = $26,400 - Remaining Premium: $66,000 - $26,400 = $39,600 - Carrying Amount of Bonds = Par Value of Bonds + Remaining Premium - Carrying Amount of Bonds = $1,230,000 + $39,600 = $1,269,6002. **Subtract the call price of the bonds from the carrying amount:** - Call Price of Bonds: $1,217,700 - Gain or Loss on Retirement: $1,269,600 - $1,217,700 = $51,900Since the carrying amount is higher than the call price, the corporation incurs a **loss** of $51,900.### Correct Answer:- **$51,900 loss.**

Bonds payable is one of the form of liability for the business, on which regular interest payments…

A corporation issued 8% bonds with a par value of $1,230,000, receiving a $66,000 premium. On the interest date 5 years later, after the bond interest was paid and after 40% of the premium had been amortized, the corporation called the bonds at $1,217,700. The gain or loss on this retirement is: Multiple Choice $51,900 gain. $12,300 loss. $12,300 gain. $0. $51,900 loss.

A corporation issued 8% bonds with a par value of $1,230,000, receiving a $66,000 premium. On the interest date 5 years later, after the bond interest was paid and after 40% of the premium had been amortized, the corporation called the bonds at $1,217,700. The gain or loss on this retirement is: Multiple Choice $51,900 gain. $12,300 loss. $12,300 gain. $0. $51,900 loss.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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