Zambrano Corp. decided to go into the market to repurchase bonds before their due date. The following are the balances of the accounts on the date of the retirement: Bonds Payable $5,000,000
Discount on Bonds Payable $76,000
If Zambrano pays $4,900,000 to retire the bond, what is the gain or loss on the early extinguishment of the debt?

Question

Quizplus · Accepted Answer

The carrying amount of the bonds is $4,924,000 ($5,000,000 - $76,000). Since Zambrano pays $4,900,000 to retire the bond, there is a gain of $24,000 ($4,924,000 - $4,900,000).