On February 1,2015,Gaslight Corp.issued 12 percent,$2,000,000 face value,ten-year bonds for $2,234,000 plus accrued interest.The bonds are dated November 1,2014,and interest is payable on May 1 and November 1.Gaslight reacquired all of these bonds at 102 on May 1,2018,and retired them.Unamortized bond premium on that date was $156,000.Ignoring the income tax effect,what was Gaslight's gain on the bond retirement?

Question

Quizplus · Accepted Answer

The gain on bond retirement is calculated as the difference between the reacquisition price and the carrying amount of the bonds. The carrying amount is the face value plus unamortized premium. The reacquisition price is 102% of the face value. Gain = (Face value + Unamortized premium) - Reacquisition price = ($2,000,000 + $156,000) - ($2,000,000 * 1.02) = $2,156,000 - $2,040,000 = $116,000.