On April 30, 2016, one year before maturity, Periwinkle Products, Inc. retired $600,000 of 8% bonds payable at 103. The book value of the bonds on April 30 was $578,400. Bond interest was last paid on April 30, 2016.
What is the gain or loss on the retirement of the bonds?
A) $19,800 loss
B) $10,800 gain
C) $39,600 loss
D) $239,600 gain

Question

Quizplus · Accepted Answer

The loss is the difference between the retirement value and the book value of the bond: (103% x $600,000) - $578,400 = $39,600.

On April 30, 2016, One Year Before Maturity, Periwinkle Products