In: Accounting
On January 1st, 2000 the Rahel S. Abate Corporation sold 20,000
of its 12.0%, 25-year, $1,000...
On January 1st, 2000 the Rahel S. Abate Corporation sold 20,000
of its 12.0%, 25-year, $1,000 face value bond to yield 10.0%
annually, interest is paid semiannually. Interest payment dates are
June 30th and December 31 of each year. The company uses the
effective interest method to amortize any bond discounts or
premiums. The issuing cost incurred were $500,000, they are to be
amortized straight line over the estimated useful life of the bond.
On July 01st, 2014, the Rahel S. Abate Corporation retires 6,000 of
its bonds through an open market purchase (it repurchases them for
cash). At that time the bonds were quoted on the market at a price
of 103. Sunny Gavaskar, the Toronto industrialist, had purchased
the bonds. Expense/amortize the bond issue cost to Interest
Expense
- Calculate the cash received from the sale of the bonds
- Prepare the journal entries on the books of the Rahel S. Abate
Corporation to record the following January 01st, 2000:
issuance of the bonds (Gross or Net Method is acceptable).
- Prepare the journal entries on the books of the Rahel S. Abate
Corporation to record the following Payments of interest for the
year 2000, and any other amortization
- Prepare the journal entries on the books of the Rahel S. Abate
Corporation to record the following July 01st, 2014, the
extinguishment of 6,000 bonds.
- Payments of interest for December 31st ,2014, and
any other amortization
- Prepare the accounting entry on July 01st, 2014 if
the policy of the Rahel S. Abate Corporation had been to carry the
bonds at fair market value.