In order to finance Plywood Company’s planned expansion, 10%, P5,000,000 face value bonds were issued on December 1, 2015 for P5,300,000 plus accrued interest. Interest is payable on November 1 and May 1. By the end of the year 2017, the book value of the bonds inclusive of unamortized premium was reported at P5,150,000. On September 1, 2018, Plywood decided to reacquire the bond at face value plus accrued interest. Plywood uses the straight line method for amortization of bond premium. What should Plywood record as gain or loss on this early extinguishment of debt?

Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter15: Investments And Fair Value Accounting
Section: Chapter Questions
Problem 1E: Parilo Company acquired 170,000 of Makofske Co., 5% bonds on May 1, 2016, at their face amount....
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In order to finance Plywood Company’s planned expansion, 10%, P5,000,000 face value bonds were issued on December 1, 2015 for P5,300,000 plus accrued interest. Interest is payable on November 1 and May 1. By the end of the year 2017, the book value of the bonds inclusive of unamortized premium was reported at P5,150,000. On September 1, 2018, Plywood decided to reacquire the bond at face value plus accrued interest. Plywood uses the straight line method for amortization of bond premium. What should Plywood record as gain or loss on this early extinguishment of debt?
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