The 10% bonds payable of Hanna Co. had a carrying amount of $4,160,000 on December 31,...

The 10% bonds payable of Hanna Co. had a carrying amount of $4,160,000 on December 31, 2019. The bonds, which had a face value of $4,000,000, were issued at a premium to yield 8%. Hanna uses the effective-interest method of amortization. Interest is paid on June 30 and December 31. On June 30, 2020, several years before their maturity, Hanna retired the bonds at 105 plus accrued interest. The loss on retirement, ignoring taxes, is

Expert Solution

Date	Cash Interest	Interest Expense	Amortization of premium	Bond premium	Carrying Amount $
	@ 5% of 4,000,000	@4% of Carrying Amount	( Cash - Expense)
December 31,2019				160,000	4,160,000
June 30,2020	200,000	166,400	33,600	126,400	4,126,400

Loss on retirement	$ 73,600	=(4000000*105%)-4126400

ekkarill92 answered 1 year ago

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