How much was the gain or loss experienced by pratt

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Reference no: EM13134873

Pratt, Incorporated sold its 8% bonds with a maturity value of $3,000,000 on August 1, 2005 for $2,946,000. At the time of the sale the bonds had 5 years until they reached maturity. Interest on the bonds is payable semiannually on August 1 and February 1. The bonds are callable at 104 at any time after August 1, 2007. By October 1, 2007, the market rate of interest has declined and the market price of Pratt's bonds has risen to a price of 101. The firm decides to refund the bonds by selling a new 6% bond issue to mature in 5 years. Pratt begins to reacquire its 8% bonds in the market and is able to purchase $500,000 worth at 101. The remainder of the outstanding bonds is reacquired by exercising the bonds' call feature. In the final analysis, how much was the gain or loss experienced by Pratt in reacquiring its 8% bonds? (Assume the firm used straight-line amortization.) Show calculations.

Reference no: EM13134873

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