Zambrano Corp. decided to go into the market to repurchase bonds before their due date. The...
Zambrano Corp. decided to go into the market to repurchase bonds before their due date. The following are the balances of the accounts on the date of the retirement:
|
Bonds Payable |
$5,000,000 |
|
Discount on Bonds Payable |
$78,000 |
If Zambrano pays $4,886,000 to retire the bond, what is the gain or loss on the early extinguishment of the debt?
A. $78,000 loss
B. $96,000 loss
C. $36,000 gain
D. No gain or loss is recognized
Please explain
Homework Answers
carrying value of the bonds = 5000000 - 78000 = $ 4922000
Bought for $ 4886000
So, there is a gain of $ 36000 ( $ 4922000 - $ 4886000 )
Option C is correct.
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