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Lopez Plastics Co. (LPC) issued callable bonds on January 1, 2018. LPC's accountant has projected...

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Question

Accounting

Lopez Plastics Co. (LPC) issued callable bonds on January 1, 2018. LPC's accountant has projected the following amortization schedule from issuance until maturity:

Date

Cash

interest

Effective

interest

Decrease in

balance

Outstanding

balance

1/1/2018

$

207,020

6/30/2018

$

7,000

$

6,211

$

789

206,230

12/31/2018

7,000

6,187

813

205,417

6/30/2019

7,000

6,163

837

204,580

12/31/2019

7,000

6,137

863

203,717

6/30/2020

7,000

6,112

888

202,829

12/31/2020

7,000

6,085

915

201,913

6/30/2021

7,000

6,057

943

200,971

12/31/2021

7,000

6,029

971

200,000

LPC calls the bonds at 95 (95% of the face value) immediately after the interest payment on 06/30/2019 and retires them. What gain or loss, if any, would LPC record on this date?

Group of answer choices

$5,420 loss

$14,580 loss

$14,580 gain

$5,420 gain

Answer & Explanation Solved by verified expert
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