Revision Company has just made the interest payment on its $3,000,000 of outstanding bonds. The unamortized discount is currently $127,400. Revision decided to retire the bonds by purchasing the bonds when the bonds were priced at 97. Which statement regarding the retirement is true?
A)Revision paid $2,910,000 to purchase the bond and recognized a $37,400 loss.
B)Revision paid $3,000,000 to purchase the bond and recognized a $164,800 loss.
C)Revision paid $2,872,600 to purchase the bond and recognized a $127,400 loss.
D)Revision paid $2,910,000 to purchase the bond and recognized a $164,800 loss.

Question

Quizplus · Accepted Answer

Revision paid $2,910,000 (97% of $3,000,000) to purchase the bonds. The book value of the bonds is $2,872,600 ($3,000,000 - $127,400). The difference between the purchase price and the book value is $37,400, which is recognized as a loss.

Revision Company Has Just Made the Interest Payment on Its