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25 August, 12:53

Jent Corp. purchased bonds at a discount of $10,000. Subsequently, Jent sold these bonds at a premium of $14,000. During the period that Jent held this investment, amortization of the discount amounted to $2,000. What amount should Jent report as gain on the sale of bonds? A. $12,000B. $22,000C. $24,000D. $26,000

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  1. 25 August, 13:35
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    Answer: Amount should Jent report as gain on the sale of bonds : $22000

    Explanation:

    Given:

    Bonds purchased at a discount of $10,000

    Bonds sold at a premium of $14,000

    Amortization of the discount amounted to $2,000.

    Therefore, gain on the sale of bonds can be computed as:

    Gains = (Cost + Premium) - (Cost - Carrying Cost)

    ∵ Carrying Cost = Purchasing Cost - Amortization

    Carrying Cost = 10000 - 2000

    Carrying Cost = $8000

    ∴ Gains = (10000 + 14000) - (10000 - 8000)

    Gains = $22000
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