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. 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. a gain of $196,000. O a loss of $196,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
a gain of $244,000.
a loss of $244,000.
O a gain of $196,000.
a loss of $196,000.
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