On July 1, 2019, Montana Company has bonds with balances as shown below.
If the company retires the bonds for $71,150, what will be the effect on the income statement?
A) loss on retirement of $4750
B) gain on retirement of $4750
C) sales revenue of $66,400
D) no effect on net income
A) loss on retirement of $4750
Explanation: Face value of the bonds being retired $70,000
Less: Discount on Bonds Payable 3600
Carrying Amount of Bonds Payable $66,400
Market price paid to retire the bonds 71,150
Loss on retirement of Bonds Payable $(4750)
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