Redeeming Bonds before Maturity Video Lessons

Concept

# Problem: Go-Go company received total cash proceeds of $94,250 on 10-year, 8% bonds issued on January 1, 2014. The bonds had a face value of$100,000, pay interest semi-annually on June 30 and December 31, and have a call price of 101. Go-Go uses the straight-line method of amortization. Go-Go Company decided to redeem the bonds on January 1, 2016 with a call price of 101. What amount of gain or loss would Go-Go report on its 2016 income statement? a. $4,600 gain b.$5,600 gain c. $5,600 loss d.$4,600 loss

###### Problem Details

Go-Go company received total cash proceeds of $94,250 on 10-year, 8% bonds issued on January 1, 2014. The bonds had a face value of$100,000, pay interest semi-annually on June 30 and December 31, and have a call price of 101. Go-Go uses the straight-line method of amortization.

Go-Go Company decided to redeem the bonds on January 1, 2016 with a call price of 101. What amount of gain or loss would Go-Go report on its 2016 income statement?

a. $4,600 gain b.$5,600 gain

c. $5,600 loss d.$4,600 loss

What scientific concept do you need to know in order to solve this problem?

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