Question

The current carrying value of Kennett's $1,088,000 face value bonds is $1,084,000. If the bonds are retired at 102, what would be the amount Kennett would pay its bondholders?

Answer 1

To retire the bonds at 102, Kennett would pay its bondholders $1,084,000.

Step-by-step explanation:

To calculate the amount Kennett would pay its bondholders when the bonds are retired at 102, we need to find the face value of the bonds. The face value of the bonds is $1,088,000. Since the bonds are being retired at 102, the market price of the bonds is 102% of the face value, which is $1,108,960. However, the current carrying value of the bonds is $1,084,000, which means Kennett would pay the bondholders the lower amount of $1,084,000.