On 6/30/12, a company paid $106,000 to retire a bond before maturity. The company recorded a $6,000 loss as part of the transaction. Which of the following must be true regarding this transaction? (check all that apply) The face value of the bond was $100,000 The company paid more than the current fair value of the bond to retire it. The market interest rate had increased since the bond was issued The face value of the bond was $106,000 The market interest rate had decreased since the bond was issued

On 6/30/12, a company paid $106,000 to retire a bond before maturity. The company recorded a $6,000 loss as part of the transaction. Which of the following must be true regarding this transaction? (check all that apply) The face value of the bond was $100,000 The company paid more than the current fair value of the bond to retire it. The market interest rate had increased since the bond was issued The face value of the bond was $106,000 The market interest rate had decreased since the bond was issued

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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Darouich Industries decided to retire an $1,000,000 bond issue before its due date. The bonds were callable by the company at 104. At the same time, the bonds were selling at 103 on the open market. The company was able to buy $500,000 of the bonds at 103 and called the remaining bonds. At that time, there was $125,000 in the Discount on Bonds Payable account. Compute the gain or loss on the retirement of the called bonds. Group of answer choices $82,500 gain $77,500 loss $82,500 loss $77,500 gain
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