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12 November, 04:39

On July 1, 2019, Montana Company has bonds with balances as shown below. Bonds Payable 66,000 Discount on Bonds Payable 3,800 If the company retires the bonds for $71,150 , what will be the effect on the income statement?

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  1. 12 November, 04:52
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    Loss on the retirement of $4,750

    Explanation:

    The following have the effect on the income statement which is a loss on the retirement and it amounts to $4,750

    It is computed as:

    Loss on retirement = Retirement value of the bonds - Issued price of the bonds

    = $71,150 - $66,400

    = $4,750

    Working Note:

    Issued Price of bonds = Face value - Discount on bonds payable

    = $70,000 - $3,600

    = $66,400
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