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McGee Company issued $200,000 face value bonds at a premium $4,500. The bonds contain a...

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Accounting

McGee Company issued $200,000 face value bonds at a premium $4,500. The bonds contain a call provision of 101. McGee decides to redeem the bonds due to a significant decline in interest rates. On that date, McGee had amortized only $1,000 of the premium.

Calculate the gain or loss on the early redemption of the bonds, the gain or loss on the redemption assuming that the call provision is 103 instead of 101, and indicate where the gain or loss should be presented on the financial statements.

Why do you suppose the call price is normally higher than 100?

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