On January 1, year 13, Frick Inc. redeemed its fifteen-year bonds of $500,000 pa
ID: 2459498 • Letter: O
Question
On January 1, year 13, Frick Inc. redeemed its fifteen-year bonds of $500,000 par value for 102. They were originally issued on January 1, year 1, at 96 with a maturity date of January 1, year 16. The bond issue costs relating to this transaction were $20,000. Frick did not elect the fair value option for reporting its financial liabilities. Frick amortizes discounts, premiums, and bond issue costs using the straight-line method. What amount of loss should Frick recognize on the redemption of these bonds?
Explanation / Answer
Amount of Loss = 500000*102% - [300000 + (20000/15*12)] = 194000