[Peachey]

Please help me I know I am on the right track on some. I tried but I am now confused. :confused:

On January 2, 2008, a company issued $500,000, 10-year bonds for $574,540. The bonds pay interest on June 30 and December 31. The face rate is 8%, and the market rate is 6%.

The interest expense on the bonds at June 30, 2008 is:
June 30, 2008
Dr Interest Expense (574,540 x .06 x 6/12) – 17,236
Dr Bond Premium 2,764
Cr Cash (500,000 x .08 x 6/12) – 20,000

The annual cash payment (paid n semiannual payments) on the bonds is:
$20,000 (500,000 x .08 x 6/12)

What is the carrying value of the bonds after the first payment is made on June 30, 2008?
$500,000 – $574,540 = $74,540
Unamortized Premium – $2,764 – $74,540 = $71,776
Carrying Value – $500,000 + $71,776 = $571,776

What is the carrying value of the bonds at the end of 10 years?
$500,000. The carrying value of the bond at the end of the bond term is the face value.

At the maturity date, besides an interest payment, the company would repay the bondholders: $500,000. The principal

If the company redeems the bonds at a call price of 102 at December 1, 2008, after using the effective interest method for the year, what is the amount of the gain or loss?
I am having problems here I can't understand what to calculate:
Carrying value of the bonds = $500,000 + ?
Bond was redeemed at 102% payment for redemption
$500,000 x 1.02 = $510,000 – ?

[Peachey]

Thank you I solved the problem.