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On July 1,2019,immediately after recording interest payments,Salsa,Inc.retired one fifth of its $500,000 of bonds payable for $97,500.The bonds were originally issued at par value in 2014.Which of the following statements is correct?
A) Stockholders' equity is not affected by the bond retirement.
B) A gain of $2,500 will be reported on the income statement.
C) A loss of $2,500 will be reported on the income statement.
D) A gain of $402,500 will be reported on the income statement.
Bond Retirement
The process of paying off bond issuance at maturity or through an early buyback, removing the bonds from circulation.
Par Value
Par Value is the nominal or face value of a stock or bond, as stated by the issuer, and has little relation to its market value.
Income Statement
The income statement is a financial report that summarizes the revenues, costs, and expenses incurred during a specific period of time, typically a fiscal quarter or year.
- Comprehend the consequences of bond retirement on fiscal statements.
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Learning Objectives
- Comprehend the consequences of bond retirement on fiscal statements.
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