A company has bonds outstanding with a par value of $100,000. The unamortized premium on these bonds is $2,700. If the company retired these bonds at a call price of 99, the gain or loss on this retirement is:. a. $1,000 gain.
b. $1,000 loss.
c. $2,700 loss.
d. $2,700 gain.
e. $3,700 gain.

e. $3,700 gain.

Explanation:

Par value of Bonds =$100,000    

Unamortized premium= $2,700    

Carrying/ Book value of bonds=  Par value of Bonds +Unamortized premium

= $100,000 + $2,700 =$102,700    

Amount at which bonds retired$100,000 x 99% = $99,000  

Gain on retirement of bonds =Book value of bonds-Amount at which bonds retired

=$102,700- $99,000 = $3,700

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