Question

On January 1, 2021, Doty Co. redeemed its 15-year bonds of $7,000,000 par value for 102. They were originally issued on January 1, 2009 at 92 with a maturity date of January 1, 2024. Doty amortizes discounts and premiums using the straight-line method. What amount of loss should Doty recognize on the redemption of these bonds (ignore taxes)

Answer 1

$252,000

Step-by-step explanation:

Calculation for What amount of loss should Doty recognize on the redemption of these bonds (ignore taxes)

Bonds redemption=[($7,000,000*1.02)-$7,000,000]+[(100%-92%*$7,000,000)-((100%-92%*$7,000,000)/15 years*12)]

Bonds redemption=[($7,140,000-$7,000,000]+[(8%*$7,000,000)-((8%*$7,000,000)/15 years*12)]

Bonds redemption=[($7,140,000-$7,000,000]+[(8%*$7,000,000)-((8%*$7,000,000)/15 years*12)]

Bonds redemption=$140,000+[(560,000-($560,000/15 years*12)]

Bonds redemption=$140,000+[(560,000-$448,000)]

Bonds redemption=$140,000+$112,000

Bonds redemption=$252,000

Therefore What amount of loss that Doty should recognize on the redemption of these bonds (ignore taxes) is $252,000