Question

The 106 bonds payable of Swifty Corporation had a carryine amount of 54200000 on December 31, 2020. The bonds, which had a face value of $4040000, were issued at a premlum to vield bx. Swifty ines the effective-interest method of amortization. Interest is paid on June 30 and December 31. On June 30,2021, several years before their maturity. Swifty retired the bonds at 104 plus acerued interest. The loss on retirement, ignoring taves, is

a.$35600
b.$50.
c.$161600.
d.$53200.

Answer 1

The loss on retirement of the bonds can be calculated by finding the carrying value of the bonds and comparing it to the amount at which they were retired. The loss in this case would be $161,600.

Step-by-step explanation:

The loss on retirement of the bonds can be calculated by finding the carrying value of the bonds and comparing it to the amount at which they were retired. The carrying value can be calculated by subtracting the unamortized bond premium from the carrying amount. In this case, the carrying amount of the bonds payable on December 31, 2020, was $54,200,000 and the face value was $4,040,000. Therefore, the unamortized bond premium would be $54,200,000 - $4,040,000 = $50,160,000. On June 30, 2021, the bonds were retired at 104% of the face value, which is $4,040,000 * 1.04 = $4,201,600. Adding the accrued interest to this amount gives $4,201,600 + $4,040,000 * 6% / 2 = $4,201,600 + $121,200 = $4,322,800.

The loss on retirement would be the difference between the carrying value and the amount at which the bonds were retired. In this case, the loss would be $50,160,000 - $4,322,800 = $45,837,200. Therefore, the correct answer is option c. $161,600.