Exhibit 14-6 Omega, Inc. issued $100,000 of its 7% five-year bonds on January 1, 2014, at 98. Interest is paid on January 1 and July 1. The bonds are callable at 104 and straight-line amortization is used. The bonds are recalled on April 1, 2016.
-Refer to Exhibit 14-6. The journal entry to record the reacquisition of the bonds will include a

Question

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The bonds were issued at 98, meaning there was a $2,000 discount ($100,000 - $98,000). Over 5 years, the discount amortizes at $400 per year. By April 1, 2016, 2.25 years have passed, so $900 of the discount is amortized, leaving $1,100 unamortized. The call price is $104,000, so the loss is $104,000 - ($98,000 + $900) = $5,100.