A corporation issued 8% bonds with a par value of $1,000,000,receiving a $20,000 premium.On the interest date five years later,after the bond interest was paid and after 40% of the premium had been written off,the corporation purchased the entire issue on the open market at 99 and retired it.The gain or loss on this retirement is:
A)$0
B)$10,000 gain
C)$10,000 loss
D)$22,000 gain
E)$22,000 loss

Question

Quizplus · Accepted Answer

The corporation received a $20,000 premium, and 40% of it was written off, leaving $12,000 unamortized. The bonds were retired at 99, which is $990,000. The carrying amount of the bonds is $1,012,000 ($1,000,000 par value + $12,000 unamortized premium). The gain on retirement is $1,012,000 - $990,000 = $22,000.

A Corporation Issued 8% Bonds with a Par Value of $1,000,000,receiving