On June 30, 2015, Omara Co. had outstanding 8%, $6,000,000 face amount, 15-year bonds maturing on June 30, 2025. Interest is payable on June 30 and December 31. The unamortized balances in the bond discount and deferred bond issue costs accounts on June 30, 2015 were $210,000 and $60,000, respectively. On June 30, 2015, Omara acquired all of these bonds at 94 and retired them. What net carrying amount should be used in computing gain or loss on this early extinguishment of debt?

Question

Quizplus · Accepted Answer

The net carrying amount is calculated by taking the face amount of the bonds ($6,000,000), subtracting the unamortized bond discount ($210,000), and subtracting the deferred bond issue costs ($60,000). This results in a net carrying amount of $5,730,000 ($6,000,000 - $210,000 - $60,000).