Question
In: Accounting
On January 1, 2016, F Corp. issued 2,200 of its 9%, $1,000 bonds for $2,274,000. These...
On January 1, 2016, F Corp. issued 2,200 of its 9%, $1,000 bonds for $2,274,000. These bonds were to mature on January 1, 2026, but were callable at 101 any time after December 31, 2019. Interest was payable semiannually on July 1 and January 1. On July 1, 2021, F called all of the bonds and retired them. The bond premium was amortized on a straight-line basis. Before income taxes, F Corp.'s gain or loss in 2021 on this early extinguishment of debt was:
Multiple Choice
$59.000 gain
$18,700 gain
$22,000 loss
$11,300 gain
Solutions
Expert Solution
Par value of bonds = $2,200,000
Issue price = $2,274,000
Premium on bonds payable = Issue price- par value of bonds
= 2,274,000-2,200,000
= $74,000
Semi annual amortization of bond premium = Premium on bonds payable/ Semi annual interest payment periods
= 74,000/20
= $3,700
Bond premium amortized till July 1, 2021 = Semi annual amortization of bond premium x 11
= 3,700 x 11
= $40,700
Unamortized bond premium on July 1 , 2021 = Premium on bonds payable- Bond premium amortized till July 1, 2021
= 74,000-40,700
= $33,300
Carrying value of bonds on July 1, 2021 = Par value of bonds +Unamortized bond premium on July 1 , 2021
= 2,200,000+33,300
= $2,233,300
Bond was callable at 101%
Cash paid to retire bonds = Par value of bonds x 101%
= $2,222,000
Gain on retirement of bonds = Carrying value of bonds on July 1, 202- Cash paid to retire bonds
= 2,233,300-2,222,000
= $11,300
Fourth option is correct.
ekkarill92 answered 2 years agoRelated Solutions
On January 1, 2016, Knorr Corporation issued $1,100,000 of 9%, 5-year bonds dated January 1, 2016....
On January 1, 2016, Knorr Corporation issued $1,100,000 of 9%,
5-year bonds dated January 1, 2016. The bonds pay interest annually
on December 31. The bonds were issued to yield 10%. Bond issue
costs associated with the bonds totaled $20,058.17.
Required: Prepare the journal entries to record the
following:
January 1, 2016 Sold the bonds at an effective rate of 10%
December 31, 2016 First interest payment using the effective
interest method
December 31, 2016 Amortization of bond issue costs...
On January 1, 2016, Knorr Corporation issued $1,100,000 of 9%, 5-year bonds dated January 1, 2016....
On January 1, 2016, Knorr Corporation issued $1,100,000 of 9%,
5-year bonds dated January 1, 2016. The bonds pay interest annually
on December 31. The bonds were issued to yield 10%. Bond issue
costs associated with the bonds totaled $20,058.17. Do not round
answers.
Required: Prepare the journal entries to record the following:
January 1, 2016 Sold the bonds at an effective rate of 10% December
31, 2016 First interest payment using the effective interest method
December 31, 2016 Amortization...
On january 1, 2016, Knorr Corporation issued $1,000,000 or 9%, 5-year bonds dated January 1, 2016....
On january 1, 2016, Knorr Corporation issued
$1,000,000 or 9%, 5-year bonds dated January 1, 2016. The bonds pay
interest on December 31. The bonds were issued to yield 10%. Bond
issue costs associated with the bonds totaled $18,000.
Prepare the journal entries to record the
following:
January 1, 2016: Sold the bonds at an effective
rate of 10%
December 21, 2016: First interest payment using the effective
interest method
December 31, 2016: Amortization of bond issue costs using the...
Chowan Corporation issued $115,000 of 9% bonds dated January 1, 2016, for $111,283.65 on January 1,...
Chowan Corporation issued $115,000 of 9% bonds dated January 1,
2016, for $111,283.65 on January 1, 2016. The bonds are due
December 31, 2019, were issued to yield 10%, and pay interest
semiannually on June 30 and December 31. Chowan uses the effective
interest method of amortization.
Required:
Prepare the journal entries to
record the issue of the bonds on January 1, 2016, and the interest
payments on June 30, 2016, December 31, 2016, and June 30, 2017. In
addition,...
On January 1, Marigold Corp. issued $5600000, 9% bonds for $5295000. The market rate of interest...
On January 1, Marigold Corp. issued $5600000, 9% bonds for
$5295000. The market rate of interest for these bonds is 10%.
Interest is payable annually on December 31. Marigold uses the
effective-interest method of amortizing bond discount. At the end
of the first year, Marigold should report unamortized bond discount
of
On January 1, 2016, A Corp. issued shares of its common stock to acquire all of...
On January 1, 2016, A Corp. issued shares of
its common stock to acquire all of the outstanding common stock of
B Inc. B’s book value was only $140,000 at the time, but A issued
12,000 shares having a par value of $1 per share and a fair value
of $20 per share. A was willing to convey these shares because it
felt that buildings (ten-year life) were undervalued on B's records
by $60,000 while equipment (five-year life) was undervalued...
On January 1, 2018, Paradiso Company issued 1,000 of its 8%, $1,000 bonds at 93. Interest...
On January 1, 2018, Paradiso Company issued 1,000 of its 8%,
$1,000 bonds at 93. Interest is payable semiannually on June 30 and
December 31. The bonds will mature on December 31, 2027. If the
company uses straight-line amortization, determine the amount of
interest expense for 2018.
A) $73,000. B) $82,000. C) $87,000. D) $89,000.
Fixzit had issued 7,200 convertible bonds at 121 on January 1, 2016. The $1,000 par value...
Fixzit had issued 7,200 convertible bonds at 121 on January 1,
2016. The $1,000 par value bonds carried an interest rate of 7% and
had a 10-year term. Interest was to be paid by the company on June
30 and December 31. Attached with each bond were twenty detachable
warrants, also issued.
Each warrant entitled the holder to purchase one share from
Fixzit at a price of $54. Further, each bond was convertible, at
the option of the holder, into...
On January 1, 2016, Trueman Corp. issued $600,000 of 20-year, 11% bonds for $554,860, Yielding a...
On January 1, 2016, Trueman Corp. issued $600,000 of 20-year,
11% bonds for $554,860, Yielding a market ( yield) rate of 12%.
Interest is payable semiannually on June 30 and December 31.
a) Confirm the bond issue price.
b) Prepare journal entries to record the bond issuance,
semiannual interest payment and discount amortization on June 30,
2016, and semiannual interest payment and discount amortization on
December 31, 2016. Use the effective interest rate method.
c) Post the Journal entries from...
Eureka Company issued $290,000 in bonds payable on January 1, 2016. The bonds were issued at...
Eureka Company issued $290,000 in bonds payable on January 1,
2016. The bonds were issued at face value and carried 4-year term
to maturity. They had a 5% stated rate of interest that was payable
in cash on January 1st of each year beginning January 1, 2017.
Based on this information, the amount of total liabilities
appearing on the December 31, 2016 balance sheet would be:
$290,000. $288,550. $304,500. $14,500.
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Suppose Rialto is the only movie cinema in a small college town, so it is essentially...
- With VMI, members of the supply chain share planning, demand, forecasting, and inventory information.
- Large lots are desirable in supply chain coordination despite increasing holding costs.
- ***Convert the C++ to Python*** #include <iostream> using std::cout; using std::cin; using std::endl; int charClass; char...
- Make-or-Buy Decision Fremont Computer Company has been purchasing carrying cases for its portable computers at a...
- The following costs were incurred for the single product produced during the first year of operations...
- Non-constant growth model: Do=$2.00 required return on equity= 5% g= 9% n=1,2 g=7% n=3,4 g=3% n=5...
ADVERTISEMENT