Question

On February 1, 2017, Pat Weaver Inc. (PWI) issued 9%, $1,500,000 bonds for $1,800,000. PWI retired all of these bonds on January 1, 2018, at 105. Unamortized bond premium on that date was $157,500. How much gain or loss should be recognized on this bond retirement

Answer 1

the gain on retirement bond is $100,000

Step-by-step explanation:

The computation of the gain or loss recognized on the bond retirement is shown below;

= Book value - paid at redemption

= ($1,500,000 + $157,500) - ($1,500,000 × 105%)

= ($1,657,500) - ($1,575,000)

= $100,000

hence, the gain on retirement bond is $100,000

The same is to be considered and relevant too