2.On December 31, year 0, your company issued a 3-year $80,000 bond with 4% coupons payable annually.Proceeds were $78,900. On January 1, year 3, your company repurchased all of the outstanding 4% bonds. Provide the financial statement amounts under each scenario market discount rate applied to the bond at January 1, year 3.

Market discount rate at repurchase Cash paid to repurchase bonds Net Book value of bond on Jan. 1, year 3 Gain (+) or loss (-)

(just after 2^nd coupon payment) on the repurchase

a. 3.9%

b. 4.5%

c. 5.8%