Oberlo Corporation has $50,000 in bonds outstanding.The unamortized discount on these bonds is $2,500.If the corporation redeems these bonds at 97,what is the gain (loss)on retirement?

Question

Quizplus · Accepted Answer

In this scenario, the corporation is redeeming the bonds before their maturity date. To calculate the gain or loss on retirement, we need to compare the carrying value of the bonds to the amount paid to redeem them.

Carrying value = Bond principal - Unamortized discount
= $50,000 - $2,500
= $47,500

Amount paid to redeem = 97% of bond principal
= 97% * $50,000
= $48,500

Gain (loss) on retirement = Amount paid to redeem - Carrying value
= $48,500 - $47,500
= $1,000 loss

Therefore, the best choice is C, $(1,000).

Oberlo Corporation Has $50,000 in Bonds Outstanding