On January 2, 2012, Tamarisk Corporation issued $1,650,000 of 10% bonds at 96 due December 31, 2021. Interest on the bonds is payable annually each December 31. The discount on the bonds is also being amortized on a straight-line basis over the 10 years. (Straight-line is not materially different in effect from the preferable “interest method”.)The bonds are callable at 101 (i.e., at 101% of face amount), and on January 2, 2017, Tamarisk called $990,000 face amount of the bonds and redeemed them.Ignoring income taxes, compute the amount of loss, if any, to be recognized by Tamarisk as a result of retiring the $990,000 of bonds in 2017

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Asked Jan 14, 2019
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On January 2, 2012, Tamarisk Corporation issued $1,650,000 of 10% bonds at 96 due December 31, 2021. Interest on the bonds is payable annually each December 31. The discount on the bonds is also being amortized on a straight-line basis over the 10 years. (Straight-line is not materially different in effect from the preferable “interest method”.)

The bonds are callable at 101 (i.e., at 101% of face amount), and on January 2, 2017, Tamarisk called $990,000 face amount of the bonds and redeemed them.

Ignoring income taxes, compute the amount of loss, if any, to be recognized by Tamarisk as a result of retiring the $990,000 of bonds in 2017

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Expert Answer

Step 1

First step is to compute the total discount on the issue of bonds on jan 2012.

This will be computed by deducting the actual amount received from face value of bonds issued.

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Step 2

As a next step Annual amortization of discount over a life of 10 years of bonds is computed by dividing the Total discount by the life of bonds.

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Step 3

The next step is to compute the amortied portion of discount and unamortized por...

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