The December 31, 2008, balance sheet of Eddy Corporation includes the following items:
The bonds were issued on December 31, 2007, at 103, with interest payable on July 1 and December 31 of each year. On January 2, 2009, Eddy retired $1,400,000 of these bonds at 98. What should Eddy record as a gain on retirement of these bonds? Ignore taxes.

Question

The December 31, 2008, balance sheet of Eddy Corporation includes the following items:
 The bonds were issued on December 31, 2007, at 103, with interest payable on July 1 and December 31 of each year. On January 2, 2009, Eddy retired $1,400,000 of these bonds at 98. What should Eddy record as a gain on retirement of these bonds? Ignore taxes.

Quizplus · Accepted Answer

$3,594,500 × .4 = $1,437,800 (CV of retired bonds)
$1,437,800 - ($1,400,000 × .98) = $65,800.

The December 31, 2008, Balance Sheet of Eddy Corporation Includes