Ask Question
27 October, 21:08

Michael company issued 8% bonds with a par value of 1,000,000 receiving 20,000 premium on the interest date 5 years later, after the bond interest was paid and after 40% of the premium had been amortized, the corporation purchased the entire issue on the open market at 99 and retired it. The gain or loss on this retirement is:

a. $10,000 gain.

b. $22,000 loss.

c. $10,000 loss.

d. $22,000 gain.

e. $0.

+4
Answers (1)
  1. 27 October, 21:15
    0
    option D - $22,000 gain

    Explanation:

    the gain can be calculated by using the following relation

    Face Value + Unamortized Premium - Purchase Price = gain

    where,

    Face Value - $1,000,000

    Unamortized Premium - 60% x $20,000

    Purchase Price - 99% x $1,000,000

    putting all value to get gain or loss on the retirement

    = $1,000,000 + (60% x $20,000) - (99% x $1,000,000)

    = $22,000 gain
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Michael company issued 8% bonds with a par value of 1,000,000 receiving 20,000 premium on the interest date 5 years later, after the bond ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers