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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?

Respuesta :

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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