Question
Asked Feb 1, 2020
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On April 30, one year before maturity, Middleton company retired $200,000 of its 9% bonds payable at the current market price  of 101 (101% of the bond face amount, or $200,000 x 1.01 = &202,000). The bond book value on April 30 is $196,000, reflecting an unamortirized discount of $3,400. Bond interest is currently fully paid and recorded up to the date of retirement.

what is the gain or loss on retirement of these bonds? Is the gain or loss a real economic gain or loss? Explain.

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Expert Answer

Step 1

The retirement amount on bond is $202,000.

The book value of bond is $196,000.

Step 2

The loss on retirement of bond is calculated below:

Finance homework question answer, step 2, image 1

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