Butler, Inc. paid $75,000 to retire a note with a face value of $83,000. The note was issued with an 8% coupon rate paid semiannually. The note was three years from maturity and had a net book value of $68,200.
What is the net gain or loss on the redemption of the note?
A) $6,800 loss
B) $8,000 gain
C) $8,000 loss
D) $6,800 gain
E) None of the above

Question

Quizplus · Accepted Answer

The net gain on the redemption of the note is calculated by subtracting the amount paid to retire the note ($75,000) from its net book value ($68,200). This results in a gain of $6,800 ($68,200 - $75,000 = -$6,800).