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  3. on january 1, assume that abx company issues $1,00

On January 1, assume that ABX Company issues $1,000,000 of 7-year, 4% bonds, the yield...

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Accounting

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On January 1, assume that ABX Company issues $1,000,000 of 7-year, 4% bonds, the yield to maturity is 3.75%, and the interest is payable annually on December 31. Calculate the interest expense in the fourth year. Use the effective interest method for amortization. At the beginning of the fifth year, the market yield to maturity is 4.25%. ABX Company decides to derecognize the bonds by paying the market price. Determine the amount of the gain or loss on the bond de-recognition. (Assume no fee is involved. Clearly indicate gain or loss and the amount.)

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