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Lopez Plastics Co.(LPC)issued callable bonds on January 1,2016.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 12/31/2017 and retires them.What gain or loss,if any,would LPC record on this date?
A)No gain or loss
B)$3,717 gain
C)$6,000 loss
D)$2,283 loss

Question

Use the following to answer questions 
Lopez Plastics Co.(LPC)issued callable bonds on January 1,2016.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 12/31/2017 and retires them.What gain or loss,if any,would LPC record on this date?
A)No gain or loss 
B)$3,717 gain 
C)$6,000 loss 
D)$2,283 loss

Quizplus · Accepted Answer

According to the amortization schedule, the carrying value of the bonds on 12/31/2017, just before the call, is $102,283. LPC has to pay the call price of 103,000 to retire the bonds. Therefore, LPC would record a loss of $2,283 ($103,000 - $102,283) on this date. Choice D is the only one that reflects this outcome.

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