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Tuesday, February 15, 2011

Retirement of Bonds

Solution is available here for U$0.25

A corporation issued 8% bonds with a par value of 1,000,000, receiving a $20,000 premium. On the interest date 5 years later, after the bond interest was paid and after 40% of the premium had been written off, the corporation purchased the entire issue on the open market at 99 and retired it The gain or loss to retirement is:
A 0
B 10,000 gain
C 10,000 loss
D 22,000 gain
E 22,000 loss

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