Question

Chang industries has bonds outstanding with a par value of $212,000 and a carrying value of $221,000. if the company calls these bonds at a price of $216,000, the gain or loss on retirement is:

Answer 1

The gain on retirement is $5,000

Explanation:

In this question, we are asked to calculate the gain or loss on retirement if a company calls some bonds at a particular price.

From the question, we can identify the following needed parameters to solve the question;

The carrying value of bonds = $221,000

Call price of bonds = $216,000

Mathematically, the gain on retirement can be calculated as follows;

Gain on retirement = carrying value - call price

= $221,000 - $216,000 = $5,000

Hence , the gain on retirement is $5,000