Lopez Plastics Co. (LPC) issued callable bonds on January 1, 2018. LPC's accountant has projected the following amortization schedule from issuance until maturity:
-LPC calls the bonds at 103 immediately after the interest payment on 12/31/2019 and retires them. What gain or loss, if any, would LPC record on this date?

Question

Lopez Plastics Co. (LPC) issued callable bonds on January 1, 2018. LPC's accountant has projected the following amortization schedule from issuance until maturity:  
-LPC calls the bonds at 103 immediately after the interest payment on 12/31/2019 and retires them. What gain or loss, if any, would LPC record on this date?

Quizplus · Accepted Answer

The cash paid by LPC was 103% of $200,000 maturity (face) value, or $206,000. The liability removed is $203,717. The difference is the loss on the bond retirement, $2,283.