Question

A company has callable bonds outstanding with a par value of $100,000. The unamortized discount on these bonds is $1,500 The company called to the boods and paid a call pr of $3,000 What is the gain o

Answer 1

The gain on the callable bonds is $98,500.

To calculate the gain on the callable bonds, we need to consider the par value of the bonds, the unamortized discount, and the call price.

The par value of the bonds is $100,000, and the unamortized discount is $1,500. This means that the bonds were issued at a discount of $1,500 below the par value.

When the company calls the bonds, they pay a call price of $3,000. The call price is the amount paid to bondholders when the company exercises its right to redeem the bonds before their maturity date.

To calculate the gain on the callable bonds, we can subtract the call price from the par value, and then add the unamortized discount:

Gain on callable bonds = Par value - Call price + Unamortized discount

= $100,000 - $3,000 + $1,500

= $98,500

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