Question

In: Accounting

At December 31, Year 16, the 12% bonds payable of Bob the Bond had a carrying...

At December 31, Year 16, the 12% bonds payable of Bob the Bond had a carrying value of $312,000. The bonds, which had a face value of $300,000, were issued at a premium to yield 10% 10 years ago. Bob uses the effective interest method of amortization of bond premium. Interest is paid on June 30 and December 31. On June 30, Year 17, Bob paid interest for June 30 and at the same time, Bob retired the bonds at 104.

Determine the loss on redemption of bonds at June 30, Year 17. [11 marks]

Expert Solution

Carrying Value of bond After 10 Years = $ 312000

DIscount rate = 10%

Cupon Rate = 12%

Semi Annual interest = 300000 * 12 % * ( 6/12 )

= $ 18000

Interest Expense = Carrying Value * Discount rate * ( 6/12)

= 312000 * 10 % * (6/12)

= $ 15600

Premium Amprtization For june 30 year 17

= 18000 - 15600

= $ 2400

unamportized premium = 12000 - 2400

= $ 9600

Carrying Value of bond = 312000 - 2400

= $ 309600

Cash paid on redemption = ( 300000 / 100 0 * 104 = $ 312000

loss on redemption = Cash paid - Carrying Value of bonds

= 312000 - 309600

= $ 2400

Date	Accounts Name	Debit	Credit
	Bond Redemption Journal entry
30-Jun Year 17	Bonds Payable	300000
	Unamortized premium	9600
	loss on redemption of Debentures	2400
	Cash ( ( 300000 / 100 ) * 104 )		312000

ekkarill92 answered 2 years ago

The 10% bonds payable of Hanna Co. had a carrying amount of $4,160,000 on December 31,...

The 10% bonds payable of Hanna Co. had a carrying amount of $4,160,000 on December 31, 2019. The bonds, which had a face value of $4,000,000, were issued at a premium to yield 8%. Hanna uses the effective-interest method of amortization. Interest is paid on June 30 and December 31. On June 30, 2020, several years before their maturity, Hanna retired the bonds at 105 plus accrued interest. The loss on retirement, ignoring taxes, is

The carrying (book) value of a bond payable is the par value of the bonds plus...

The carrying (book) value of a bond payable is the par value of the bonds plus any discount or minus any premium. True or False

GIT Inc Issued 60,000 of 5%, 12 year bonds payable on March 31, 20x0. The market...

GIT Inc Issued 60,000 of 5%, 12 year bonds payable on March 31, 20x0. The market interest rate at the date of issuance was 8%, and the GIT bonds pay interest semi annually. 1. Prepare an effective interest ammortization table for the bonds through the first three interest payments. 2. Record GIT, Incs issuance of the bonds on March 31, 20x0, and payment of the first semi annual interest amount and amortization of the bond discount on Sept 30, 20x0.

On December 31, 2009, Thomas, Inc. borrowed $1,120,000 on a 12%,15-year mortgage note payable. The...

On December 31, 2009, Thomas, Inc. borrowed $1,120,000 on a 12%, 15-year mortgage note payable. The note is to be repaid in equal semiannual installments of $81,366 (payable on June 30 and December 31). Prepare journal entries to reflect (a) the issuance of the mortgage note payable, (b) the payment of the first installment on June 30, 2010, and (c) the payment of the second installment on December 31, 2010. Round amounts to the nearest dollar.

At 12/31/16, ABC Company had the following balances: &n

At 12/31/16, ABC Company had the following balances: DebitCredit Accounts Receivable$182,000 Allowance for Doubtful Accounts $16,500 During 2017 the following transactions occurred: Accounts receivable of $138,000 were collected, including accounts of $60,000 on which 2% of sales discounts was allowed. The company uses the gross method to record sales made on credit. Several customers notified ABC of bankruptcy, and ABC wrote off the accounts in the amount of $17,500. ABC received $5,300 in payment for an account previously...

Joshua company had the following information in 2016. Accts Rec 12/31/16.....$15000 Allowance for uncollected account 12/31/16...

Joshua company had the following information in 2016. Accts Rec 12/31/16.....$15000 Allowance for uncollected account 12/31/16 (before adjustment).....$950 credit service revenue during 2016.....$45000 Cash service revenue during 2016.....$15000 Collections from customers on account during 2016.......$45000 If uncollectible accounts are determined by the aging-of-receivables method to be $ 1 240, the uncollectible account expense for 2016 would be $ 290. Using the aging-of-receivables method, the balance of the Allowance account after the adjusting entry at year-end 2016 would be

Apollo Corporation issued $560,000 of 7%, 12-year bonds payable on March 31, 2016. The market interest...

Apollo Corporation issued $560,000 of 7%, 12-year bonds payable on March 31, 2016. The market interest rate at the date of issuance was 10%, and the Apollo Corporation bonds pay interest semiannually. Apollo Corporation's year-end is March 31. Calculate the issue price of the bonds using the PV function in Microsoft® Excel®. Prepare an effective-interest amortization table for the bonds through the first three interest payments. Round amounts to the nearest dollar. Record Apollo Corporation's issuance of the bonds on...

On December 31, 2019, Repsol Corp issued $1,400,000, 9%, 5-year bonds. Interest is payable semiannually on...

On December 31, 2019, Repsol Corp issued $1,400,000, 9%, 5-year bonds. Interest is payable semiannually on June 30 and December 31. The corporation uses the effective interest method of amortizing bond premium or discount. Using a financial calculator or excel, estimate the issue price of the bonds under the following three assumptions: (1) Market Rate is 9% (2) Market Rate is 8%

On December 31, 2018, Herndon Corporation issues 5%, 10-year convertible bonds payable with a face value...

On December 31, 2018, Herndon Corporation issues 5%, 10-year convertible bonds payable with a face value of $2,000,000. The semiannual interest dates are June 30 and December 31. The market interest rate is 7%. Herndon amortizes bond discounts using the effective-interest method. 1. Use the pv function in excel to calculate the issue price of the bonds. 2. Prepare an effective-interest method amortization table for the first four semiannual interest periods. 3. Journalize the following transactions: a. Issuance of the...

Cortez Company issued $180,000, 11%, 10-year bonds on December 31, 2018, for $170,000. Interest is payable...

Cortez Company issued $180,000, 11%, 10-year bonds on December 31, 2018, for $170,000. Interest is payable semiannually on June 30 and December 31. Cortez uses the straight-line method of amortization. Prepare the journal entries to record: a) The issuance of the bonds. b) The payment of interest and the discount amortization on June 30, 2019. c) The payment of interest and the discount amortization on December 31, 2019. d) The retirement of the bonds at maturity, assuming interest for the...