On July 1 2019 Montana Company has bonds with balances as sh

On July? 1, 2019, Montana Company has bonds with balances as shown below. ???Bonds Payable 68 comma 000 68,000 Discount on Bonds Payable 4 comma 700 4,700 If the company retires the bonds for $ 71 comma 150 $71,150?, what will be the effect on the income? statement? A. loss on retirement of $ 7 comma 850 $7,850 B. no effect on net income C. gain on retirement of $ 7 comma 850 $7,850 D. sales revenue of $ 63 comma 300 $63,300 Click to select your answer.

Solution

Loss or gain = Bonds outstanding value - Discount on bonds payable - Amount payable on retirement.

Loss or Gain = 68,000 - 4,700 - 71,150 = $7,850 Loss on retirement. Thus,

Option A.