On January 1, 2019, Hernandez Corporation issued $18,000,000 of 10% ten-year bonds at 103. The bonds are callable at the option of Hernandez at 105. Hernandez has recorded amortization of the bond premium on the straight-line method (which was not materially different from the effective-interest method). On December 31, 2025, when the fair value of the bonds was 96. Hernandez repurchased $4,000,000 of the bonds in the open market at 96. Hernandez has recorded interest and amortization for 2025. Ignoring income taxes and assuming that the gain is material, Hernandez should report this reacquisition as O a gain of $244,000. O a loss of $244,000. O a gain of $196,000. O a loss of $196,000.

On January 1, 2019, Hernandez Corporation issued $18,000,000 of 10% ten-year bonds at 103. The bonds are callable at the option of Hernandez at 105. Hernandez has recorded amortization of the bond premium on the straight-line method (which was not materially different from the effective-interest method). On December 31, 2025, when the fair value of the bonds was 96. Hernandez repurchased $4,000,000 of the bonds in the open market at 96. Hernandez has recorded interest and amortization for 2025. Ignoring income taxes and assuming that the gain is material, Hernandez should report this reacquisition as O a gain of $244,000. O a loss of $244,000. O a gain of $196,000. O a loss of $196,000.

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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