The Ginsberg Co. issued 10-year bonds on April 30, YR 1. The debt has a face value of $1,000,000 and an annual stated interest rate of 8%. Interest payments are due semiannually beginning October 31, YR 1. The market interest rate on the bonds is 10%. Ginsberg amortizes any discount or premium using the effective interest method and has a fiscal year-end of December 31. In addition, Ginsberg incurs $30,000 of bond issue costs related to this bond issue. Ginsberg uses a straight line to recognize bond issue costs at the end of each year.
If Ginsberg retires 40% of the bonds on May 31, YR 2 by paying 101 (plus accrued interest), answer the following questions. Assume interest expense has been recognized up to 5/31/YR2.
Cash paid = [ Select ] ["404,000", "1,000,000", "400,000", "1,010,000"]
Gain/Loss recognized = [ Select ] ["Loss of 62,182", "Gain of 62,182", "No Gain or Loss"]
Discount/Premium removed = [ Select ] ["Discount of 46,482", "Premium of 46,482", "Discount of 116,899", "Premium of 116,899"]
Bonds Payable eliminated = [ Select ] ["400,000", "1,010,000", "404,000", "1,000,000"]
