Question

Chang Industries has bonds outstanding with a par value of $216,000 and a carrying value of $227,000. If the company calls these bonds at a price of $221,000, the gain or loss on retirement is:

A. 5,000 gainB. 6,000 gainC. 6,000 lossD. 5,000 lossE. 11,000 gain

Answer 1

A. $6,000 gain

Step-by-step explanation:

Data provided

Carrying Value = $227,000

Call Price = $221,000

The computation of gain or loss on retirement is shown below:-

Gain on Retirement = Carrying Value - Call Price

= $227,000 - $221,000

= $6,000

Therefore for computing the gain on retirement we simply deduct the call price from carrying value.