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23 April, 10:02

A company has bonds outstanding with a par value of $100,000. The unamortized discount on these bonds is $5,000. The company retired these bonds by buying them on the open market at 92. What is the gain or loss on this retirement?

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  1. 23 April, 13:47
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    Answer: Gain or loss on this retirement = $3000 (Gain)

    Explanation:

    Given that,

    Outstanding Bonds with a par value = $100,000

    Unamortized discount on these bonds = $5,000

    So, bonds carrying a value = Outstanding Bonds with a par value - Unamortized discount

    = 100000 - $5,000

    = $95000

    Company retired these bonds by buying them on the open market at 92 = 92% of 100000

    = 92000

    Therefore,

    Gain or loss on this retirement = bonds carrying a value - Price paid at retirement

    = 95000 - 92000

    = $3000 (Gain)
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