Question

X2 issued callable bonds on January 1, 2021. The bonds pay interest annually on December 31 each year. X2's accountant has projected the following amortization schedule from issuance until maturity:

Date Cash Paid Interest Expense Decrease in Carrying Value Carrying Value
01/01/2021 $ 229,267
12/31/2021 $ 15,400 $ 13,756 $ 1,644 227,623
12/31/2022 15,400 13,657 1,743 225,881
12/31/2023 15,400 13,553 1,847 224,033
12/31/2024 15,400 13,442 1,958 222,075
12/31/2025 15,400 13,325 2,075 220,000

X2 buys back the bonds for $103,000 immediately after the interest payment on 12/31/2022 and retires them. What gain or loss, if any, would X2 record on this date?

Answer 1

Answer:

Loss = $122,881

Explanation:

Relevant Data provided

Bay Back Price of the bond = $103,000

Carrying value of the Bond As on 12/31/2022 = $225,881

As per the given question the solution of gain or loss is provided below:-

Gain or Loss = Bay Back Price of the bond - Carrying value of the Bond As on 12/31/2022

= $103,000 - $225,881

Loss = $122,881

So, we have calculated the loss by using the above formula.