LPC calls the bonds at 103 immediately after the interest payment on 12/31/10 and retires them. What gain or loss, if any, would LPC record on this date?
A)No gain or loss
B)$3,717 gain
C)$6,000 loss
D)$2,283 loss The cash paid by LPC was 103% of $200,000 maturity (face) value, or $206,000.The liability removed is $203,717.The difference is the loss on the bond retirement, $2,283.

Question

Quizplus · Accepted Answer

LPC paid 103% of the face value of the bond ($200,000) to retire it, or $206,000. However, the liability removed from their books was only $203,717 (the face value plus the last interest payment). Therefore, LPC would record a loss on the retirement of $2,283.

LPC Calls the Bonds at 103 Immediately After the Interest