Calculate the amount of loss to be recognized by novak

Reference no: EM131881705

Problem

On January 2, 2012, Novak Corporation issued $1,050,000 of 10% bonds at 97 due December 31, 2021. Interest on the bonds is payable annually each December 31. The discount on the bonds is also being amortized on a straight-line basis over the 10 years. (Straight-line is not materially different in effect from the preferable "interest method".)

The bonds are callable at 102 (i.e., at 102% of face amount), and on January 2, 2017, Novak called $630,000 face amount of the bonds and redeemed them.

Ignoring income taxes, compute the amount of loss, if any, to be recognized by Novak as a result of retiring the $630,000 of bonds in 2017.

Prepare the journal entry to record the redemption.

Reference no: EM131881705

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