Question

On March 31, 2016, Bundy Company retired $10,300,000 of bonds, which have an unamortized premium of $550,000, by paying bondholders $10,125,000. What is the amount of the gain or loss on the retirement of the bonds?

$175,000 loss.

$175,000 gain.

$375,000 loss.

$725,000 gain.

On July 1, 2017, immediately after recording interest payments, Salsa, Inc. retired one fifth of its $504,000 of bonds payable for $97,900. The bonds were originally issued at par value in 2012. Which of the following statements is correct?

A loss of $2,900 will be reported on the income statement.

Stockholders’ equity is not affected by the bond retirement.

A gain of $2,900 will be reported on the income statement.

A gain of $406,100 will be reported on the income statement.



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