Retiring bonds payable before maturity On January 1, 2018, Patterson Company issued $100,000 of 10%, five-year bonds payable at 107. Patterson Company has extra cash and wishes to retire the bonds...

Retiring bonds payable before maturity

On January 1, 2018, Patterson Company issued $100,000 of 10%, five-year bonds payable at 107. Patterson Company has extra cash and wishes to retire the bonds payable on January 1, 2019, immediately after making the second semi-annual interest payment. To retire the bonds, Patterson Company pays the market price of 94.

Requirements

1. What is Patterson Company’s carrying amount of the bonds payable on the retirement date?

2. How much cash must Patterson Company pay to retire the bonds payable?

3. Compute Patterson Company’s gain or loss on the retirement of the bonds payable.