On January 1, 2014, Ishikawa Inc. issued $500,000 of 9-percent, five-year bonds payable at 104. Ishikawa has extra cash and wishes to retire all the bonds payable on January 1, 2015, immediately after making the second semiannual interest payment. Ishikawa uses the straight-line method of amortization. To retire the bonds, Ishikawa pays the market price of 98.
1. What is Ishikawa's carrying amount of the bonds payable on the retirement date?
2. How much cash must Ishikawa pay to retire the bonds payable?
3. Compute Ishikawa's gain or loss on the retirement of the bonds payable.