The 10% bonds payable of Klein Company had a net carrying amount of $570,000 on December 31, 2007. The bonds, which had a face value of $600,000, were issued at a discount to yield 12%. Interest was paid on January 1 and July 1 of each year. On July 2, 2008, several years before their maturity, Klein retired the bonds at 102. The interest payment on July 1, 2008 was made as scheduled and $4,200 of the discount was amortized. What is the loss that Klein should record on the early retirement of the bonds on July 2, 2008? Ignore taxes.
A) $12,000
B) $37,800
C) $33,600
D) $42,000

Question

Quizplus · Accepted Answer

$570,000 + $4,200 = $574,200 (CV of bonds)
$574,200 - ($600,000 × 1.02) = $37,800.

The 10% Bonds Payable of Klein Company Had a Net