On January 1, 2012, Platz, Inc., issued $200,000 of 9%, five-year bonds payable at 106. Platz has extra cash and wishes to retire the bonds payable on January 1, 2013, immediately after making the second semiannual interest payment. To retire the bonds, Platz pays the market price of 96. Platz uses the straight-line amortization method.
Requirements
1. What is Platz’s carrying amount of the bonds payable on the retirement date?
2. How much cash must Platz pay to retire the bonds payable?
3. Compute Platz’s gain or loss on the retirement of the bonds payable.