Burger Barn Company issued $150,000 face value bonds at a premium of $6,000. The bonds contain a call provision of 102. Burger Barn decides to redeem the bonds due to a significant decline in interest rates. On that date, Burger Barn had amortized only $1,500 of the premium.
REQUIRED:
1. Calculate the gain or loss on early redemption of the bonds.
2. Identify the accounting equation effects reflecting the bond redemption.
3. Where should the gain or loss should be presented on the financial statements?
4. Why is the call price is normally higher than 100?

Question

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The Answer of Burger Barn Company issued $150,000 face value bonds at a premium of $6,000. The bonds contain a call provision of 102. Burger Barn decides to redeem the bonds due to a significant decline in interest rates. On that date, Burger Barn had amortized only $1,500 of the premium.
REQUIRED:
1. Calculate the gain or loss on early redemption of the bonds.
2. Identify the accounting equation effects reflecting the bond redemption.
3. Where should the gain or loss should be presented on the financial statements?
4. Why is the call price is normally higher than 100?

Burger Barn Company Issued $150,000 Face Value Bonds at a Premium