On January 1. 2011. F Corp. issued 2.500 of Its 9%. $1,000 bonds for $2,596,000.
ID: 2491724 • Letter: O
Question
On January 1. 2011. F Corp. issued 2.500 of Its 9%. $1,000 bonds for $2,596,000. These bonds were to mature on January 1. 2021. but were callable at 101 any time after December 31. 2014. Interest was payable semiannually on July 1 and January 1. On July 1. 2016. F called all of the bonds and retired them. The bond premium was amortized on a straight-line basis. Before income taxes. F Corp.'s gain or loss in 2016 on this early extinguishment of debt was: $25,000 los $18,200 gain. $73,000 gain. $27,800 gain.Explanation / Answer
55% OF TERM HAS EXPIRED SO 45% REMAINS ON BOD PREMIMUM. $96,000*.45=$43,200.
BOND CALL PREMUMIN WAS 1% OR $25,000. Gain: $43,200-25,000= $18,200 GAIN