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9 July, 03:56

Tony Hawk's Adventure (THA) issued callable bonds on January 1, 2021. THA's accountant has projected the following amortization schedule from issuance until maturity: Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 01/01/2021 $ 379,697 06/30/2021 $ 16,000 $ 18,985 $ 2,985 382,682 12/31/2021 16,000 19,134 3,134 385,816 06/30/2022 16,000 19,291 3,291 389,107 12/31/2022 16,000 19,455 3,455 392,562 06/30/2023 16,000 19,628 3,628 396,190 12/31/2023 16,000 19,810 3,810 400,000 THA buys back the bonds for $384,446 immediately after the interest payment on 12/31/2021 and retires them. What gain or loss, if any, would THA record on this date

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  1. 9 July, 03:58
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    THA would record a gain of $1,370 on 12/31/2021

    Explanation:

    Particulars Amount ($)

    Carrying value of bonds after the interest payment on 12/31/2021 385,816

    Less: Amount paid on redemption on 12/31/2021 (384,446)

    Gain on redemption of bonds 1,370

    Entry would be-

    Date Account titles and Explanation Debit ($) Credit ($)

    12/31/2021 Bonds payable 385,816

    Cash 384,446

    Gain on redemption of bonds 1,370

    (To record redemption of bonds)
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