Craig Corporation issued a $100,000,10-year,10 percent bond on January 1,2013,for $112,000.Craig uses the straight-line method of amortization.On April 1,2016,Craig reacquired the bonds for retirement when they were selling at 102 on the open market.How much gain or loss should Craig recognize on the retirement of the bonds?

Question

Quizplus · Accepted Answer

The carrying value of the bond on April 1, 2016 would be:
$100,000 (face value) + ($100,000 x 10% x 3.25 years) - ($12,000 amortization) = $128,500
Since the bonds were reacquired for $102,000, there is a gain of $26,500. Therefore, the answer is C.

Craig Corporation Issued a $100,000,10-Year,10 Percent Bond on January 1,2013,for