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 $341,728 06/30/2021 $14,400 $17,086 $2,686 344,414 12/31/2021 14,400 17,221 2,821 347,235 06/30/2022 14,400 17,362 2,962 350,197 12/31/2022 14,400 17,510 3,110 353,307 06/30/2023 14,400 17,665 3,265 356,572 12/31/2023 14,400 17,828 3,428 360,000 THA buys back the bonds for $345,005 immediately after the interest payment on 12/31/2021 and retires them. What gain or loss, if any, would THA record on this date? Multiple Choice $3,277 loss. $2,230 gain. $14,995 gain.
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 $341,728 06/30/2021 $14,400 $17,086 $2,686 344,414 12/31/2021 14,400 17,221 2,821 347,235 06/30/2022 14,400 17,362 2,962 350,197 12/31/2022 14,400 17,510 3,110 353,307 06/30/2023 14,400 17,665 3,265 356,572 12/31/2023 14,400 17,828 3,428 360,000 THA buys back the bonds for $345,005 immediately after the interest payment on 12/31/2021 and retires them. What gain or loss, if any, would THA record on this date? Multiple Choice $3,277 loss. $2,230 gain. $14,995 gain.
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 5P
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Question
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 | $341,728 | |||
| 06/30/2021 | $14,400 | $17,086 | $2,686 | 344,414 |
| 12/31/2021 | 14,400 | 17,221 | 2,821 | 347,235 |
| 06/30/2022 | 14,400 | 17,362 | 2,962 | 350,197 |
| 12/31/2022 | 14,400 | 17,510 | 3,110 | 353,307 |
| 06/30/2023 | 14,400 | 17,665 | 3,265 | 356,572 |
| 12/31/2023 | 14,400 | 17,828 | 3,428 | 360,000 |
THA buys back the bonds for $345,005 immediately after the interest payment on 12/31/2021 and retires them. What gain or loss, if any, would THA record on this date?
Multiple Choice
-
$3,277 loss.
-
$2,230 gain.
-
$14,995 gain.
-
No gain or loss.
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