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snow_lady
4 days ago
6

Washington Inc. issued $846,000 of 6%, 20-year bonds at 98 on January 1, 2009. Through January 1, 2017, Washington amortized $9,

840 of the bond discount. On January 1, 2017, Washington Inc. retired the bonds at 102 (after making the interest payment on that date). What is the gain or loss that Washington Inc. would report for the retirement of this bond
Business
1 answer:
harina [3.5K]4 days ago
4 0

Answer:

The bond discount at issuance is calculated as follows: $846,000 - ($846,000/100 *98)

The bond discount upon issuance is $846,000 minus $829,080

Thus, the bond discount at issuance equals $16,920

Bond Payable = $846,000

The un-amortized bond discount calculates to $16,920 - $9,840

This gives an un-amortized bond discount of $7,080

The redemption value of the bond is determined by 102/100 * $846,000

Thus, the redemption value of the bond is $ 862,920

Finally, the loss on bond retirement is given by the difference between the redemption value and (Bond Payable - Un-amortized bond discount)

Loss on retirement of the bond = $862,920 - ($846,000 - $7,080)

The loss on retirement of the bond calculates to $862,920 - $838,920

This results in a loss of $24,000

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