Moon Corporation issued $300,000 par value 10-year bonds at 107 on January 1,2003,which Star Corporation purchased.On July 1,2007,Sun Corporation purchased $120,000 of Moon bonds from Star.The bonds pay 12 percent interest annually on December 31.The preparation of consolidated financial statements for Moon and Sun at December 31,2009,required the following eliminating entry:

-Based on the information given above,what amount of gain or loss on bond retirement is included in the 2007 consolidated income statement?

Question

Moon Corporation issued $300,000 par value 10-year bonds at 107 on January 1,2003,which Star Corporation purchased.On July 1,2007,Sun Corporation purchased $120,000 of Moon bonds from Star.The bonds pay 12 percent interest annually on December 31.The preparation of consolidated financial statements for Moon and Sun at December 31,2009,required the following eliminating entry:
 
-Based on the information given above,what amount of gain or loss on bond retirement is included in the 2007 consolidated income statement?

Quizplus · Accepted Answer

The gain on bond retirement is calculated as the difference between the carrying value of the bonds and the repurchase price. In this case, the carrying value of the bonds is $10,800 and the repurchase price is $12,000, resulting in a gain of $1,200.

Moon Corporation Issued $300,000 Par Value 10-Year Bonds at 107