Cortez Company Issues $4,000,000 Face Value of Bonds at 96

question 121

Multiple Choice

Cortez Company issues $4,000,000 face value of bonds at 96 on January 1, 2013. The bonds are dated January 1, 2013, pay interest semiannually at 8% on June 30 and December 31, and mature in 10 years. Straight-line amortization is used for discounts and premiums. On September 1, 2016, $2,400,000 of the bonds are called at 102 plus accrued interest. What gain or loss would be recognized on the called bonds on September 1, 2016?

• A) $240,000 loss
• B) $108,800 loss
• C) $144,000 loss
• D) $181,000 loss