Solved: What amount of gain or loss from retirement of debt, Cost Accounting

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What amount of gain or loss from retirement of debt

Response to the following problem:

Soap Company issued $200,000 of 8%, 5-year bonds on January 1, 20X6. The discount on issuance was $12,000. Bond interest is paid annually on December 31. On December 31, 20X8, Pumice Company purchased one-half of the outstanding bonds for $96,000. Both companies use the straight-line method of amortization. What amount of gain or loss from retirement of debt will be reported on the 20X8 consolidated financial statements?

a. $1,600 gain.

c. $1,200 gain.

b. $1,600 loss.

d. $1,200 loss.

How do you calculate the answer?

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Cost Accounting: What amount of gain or loss from retirement of debt

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Cost Accounting: What amount of gain or loss from retirement of debt

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