Question

The 12% bonds payable of Tegan Industries had a carrying amount of $3,120,000 on December 31, 2020. The bonds, which had a face value of $3,000,000, were issued at a premium to yield 10%. Tegan uses the effective-interest method of amortization. Interest is paid on June 30 and December 31. On June 30, 2021, several years before their maturity, Tegan retired the bonds at 104 plus accrued interest. Ignoring taxes, which of the following is the loss on retirement?

Answer 1

Step-by-step explanation:

Carrying value of bond Dec31,2020 - 3120,000

Retirement value 3120,000

Add: interest [3000,000*0.06=180000]

Loss on retirement is [3120,000-3120,000-180000]=-180,000