Chang Industries has bonds outstanding with a par value of $200,000 and a carrying value of $203,000. If the company calls these bonds at a price of $201,000, the gain or loss on retirement is:
A) $1,000 loss.
B) $3,000 gain.
C) $2,000 loss.
D) $2,000 gain.
E) $1,000 gain.

Question

Quizplus · Accepted Answer

The gain on retirement is calculated as the difference between the call price and the carrying value. In this case, the call price is $201,000 and the carrying value is $203,000, so the gain is $2,000.

Chang Industries Has Bonds Outstanding with a Par Value of $200,000