Milton Corporation has $2,000,000 of bonds outstanding. The unamortized premium is $151,000. If the company retired the bonds at 101, what would be the gain or loss on the retirement?
A) $131,000 gain
B) $131,000 loss
C) $151,000 gain
D) $151,000 loss

Question

Quizplus · Accepted Answer

The bonds are retired at 101, meaning 101% of $2,000,000, which is $2,020,000. The carrying amount of the bonds is $2,000,000 + $151,000 = $2,151,000. The difference between the carrying amount and the retirement price is $2,151,000 - $2,020,000 = $131,000, resulting in a gain.

Milton Corporation Has $2,000,000 of Bonds Outstanding