The December 31, 2011, Statement of Financial Position of Bordeaux

question 81

Multiple Choice

The December 31, 2011, statement of financial position of Bordeaux Corporation includes the following items:
9% bonds payable due December 31, 2018 €3,081,000
The bonds were issued on December 31, 2008, and have a face amount of €3,000,000 with interest payable semi-annually on July 1 and December 31 of each year.On January 1, 2012, Bordeaux retired €1,000,000 of these bonds at 98.What amount should Bordeaux report on the company's 2012 income statement as gain or loss on the retirement of the bonds?

• A)€47,000 loss.
• B)€141,000 loss.
• C)€7,000 loss.
• D)€21,000 loss.

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Definitions:

Equity Securities

Financial instruments representing ownership interest in a company, such as stocks.

Redeemability

The quality of being able to be redeemed or converted into some form of value or benefit.

Redemption

The act of buying back something previously sold, such as a company repurchasing its own shares from investors.

Stated Capital

This refers to the capital that a corporation declares in its charter as its official capital.