On December 1, 2008, the Cone Company issued its 10%, $2 million face value bonds for $2.3

Question:

On December 1, 2008, the Cone Company issued its 10%, $2 million bonds for $2.3 million, plus accrued interest. Interest is payable on November 1 and May 1. On December 31, 2010, the book value of the bonds, inclusive of the unamortized premium, was $2.1 million. On July 1, 2011, Cone reacquired the bonds at 98, plus accrued interest. Cone appropriately uses the straight-line method for the amortization because the results do not materially differ from those of the effective interest method.

Required
Prepare a schedule to compute the gain or loss on this extinguishment of debt. Show supporting computations in good form.

Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...