The December 31, 2017, balance sheet of Hess Corporation includes the following items: 9% bonds payable...

The December 31, 2017, balance sheet of Hess Corporation includes the following items:

9% bonds payable due December 31, 2026 $5,000,000

Unamortized premium on bonds payable 135,000

The bonds were issued on December 31, 2016, at 103, with interest payable on July 1 and December 31 of each year. Hess uses straight-line amortization. On March 1, 2018, Hess retired $2,000,000 of these bonds at 98 plus accrued interest. What should Hess record as a gain on retirement of these bonds? Ignore taxes.

a. $94,000.

b. $54,000.

c. $93,000.

d. $100,000.

Solutions

Expert Solution

Correct answer-----------(c) $93,000

Working

Date	Accounts title and explanation	Debit	Credit
March 1	Bonds payable	$ 2,000,000.00
	Premium on bonds payable	$ 53,000.00
	Gain on redemption of bonds		$ 93,000.00
	Cash		$ 1,960,000.00
	(To record redemption of bonds)

Face value of Bond redeemed	$ 2,000,000.00
Equivalent Unamortized premium on dec 31 2017	$ 54,000.00
Less: Premium to be amortized for 2 month (january and february 2018)	$ 1,000.00
Total unamortized premium on bond of $2000000 (54000-1000)	$ 53,000.00

Issue price	$ 5,150,000.00
Face value of Bond redeemed	$ 5,000,000.00
Premium on bonds	$ 150,000.00
Less: Unamortized premium on bonds payable on decembe 31 2017	$ 135,000.00
Premium amortized in 1 year	$ 15,000.00
Premium to be amortized for 2 months (15000/12*2)	$ 2,500.00
Equivalent premium to be amortized on $2000000 bonds	$ 1,000.00

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Following is a list of items taken from the December 31, 2017, balance sheet of Reagan...

Following is a list of items taken from the December 31, 2017, balance sheet of Reagan Company (amounts omitted): Accounts payable Goodwill Accrued expenses Income taxes payable Accumulated depreciation—buildings Land Accumulated depreciation—machinery and equipment Machinery and equipment Bonds payable Notes payable to banks (short term) Buildings Preferred stock Cash Prepaid expenses Common stock Raw materials Contributed capital in excess of par Retained earnings Current portion of long-term debt Short-term investments Deferred tax liability (noncurrent) Trade accounts receivable Finished products inventory...

The Sage Corporation prepared, for 2017 and 2016, the following balance sheet data: December 31 2017...

The Sage Corporation prepared, for 2017 and 2016, the following balance sheet data: December 31 2017 2016 Cash .................................... $ 87,375 $ 63,750 Available-for-sale securities (not cash equivalents) ......................... 17,250 105,000 Accounts receivable ..................... 90,000 86,250 Merchandise inventory ................... 187,500 163,500 Prepaid insurance ....................... 1,125 1,500 Land, buildings, and equipment ......... 1,378,875 1,087,500 Accumulated depreciation ................ (558,750) (498,750) Total ................................. $1,203,375 $1,008,750 Accounts payable ........................ $ 153,375 $ 236,250 Salaries payable ........................ 18,750 26,250 Notes payable--bank (current) ........... 37,500 150,000...

At December 31, 2017, the following balances existed for Sweeney Corporation: Bonds Payable (10%) $1,500,000 Premium...

At December 31, 2017, the following balances existed for Sweeney Corporation: Bonds Payable (10%) $1,500,000 Premium on Bonds Payable 40,000 The bonds mature on 12/31/22. Straight-line amortization is used. If 30% of the bonds are retired at 105 on January 1, 2019, what is the loss on early extinguishment?

In alphabetical order below are balance sheet items for Tamarisk, Inc. at December 31, 2017.

In alphabetical order below are balance sheet items for Tamarisk, Inc. at December 31, 2017. Accounts payable $83,200 Accounts receivable 90,880 Cash 28,160 Common stock 23,040 Retained earnings 12,800 Prepare a balance sheet. (List assets in order of liquidity.)

The December 31, 2012 balance sheet of Wolfe Co. included the following items: 7.5% convertible bonds...

The December 31, 2012 balance sheet of Wolfe Co. included the following items: 7.5% convertible bonds payable due December 31, 2020 $2,000,000 Unamortized Premium on bonds payable 100,000 The bonds were issued on December 31, 2010 at 104, with interest payable every June 30 and December 31. Each $1,000 bond is convertible to 20 shares of $5 par value common stock. The stocks had a market price of $25 per share. On January 1, 2013, after recording the December interest,...

XYZ Corporation is preparing its December 31, 2021, balance sheet. The following items may be reported...

XYZ Corporation is preparing its December 31, 2021, balance sheet. The following items may be reported as either a current or long-term liability.  1. On December 15, 2021, XYZ declared a cash dividend of $2.50 per share to stockholders of record on December 31. The dividend is payable on January 15, 2022. XYZ has issued 1,000,000 shares of common stock, of which 50,000 shares are held in treasury.  2. At December 31, bonds payable of $100,000,000 are outstanding....

Novak Corporation is preparing its December 31, 2020, balance sheet. The following items may be reported...

Novak Corporation is preparing its December 31, 2020, balance sheet. The following items may be reported as either a current or long-term liability. 1. On December 15, 2020, Novak declared a cash dividend of $3.50 per share to stockholders of record on December 31. The dividend is payable on January 15, 2021. Novak has issued 1,000,000 shares of common stock, of which 50,000 shares are held in treasury. 2. At December 31, bonds payable of $104,670,000 are outstanding. The bonds...

The balance sheet at December 31, 2021, for Nevada Harvester Corporation includes the liabilities listed below:...

The balance sheet at December 31, 2021, for Nevada Harvester Corporation includes the liabilities listed below: 11% bonds with a face amount of $38 million were issued for $38 million on October 31, 2012. The bonds mature on October 31, 2032. Bondholders have the option of calling (demanding payment on) the bonds on October 31, 2022, at a redemption price of $38 million. Market conditions are such that the call is not expected to be exercised. Management intended to refinance...

The balance sheet at December 31, 2018, for Nevada Harvester Corporation includes the liabilities listed below:...

The balance sheet at December 31, 2018, for Nevada Harvester Corporation includes the liabilities listed below: A. 11% bonds with a face amount of $49 million were issued for $49 million on October 31, 2009. The bonds mature on October 31, 2029. Bondholders have the option of calling (demanding payment on) the bonds on October 31, 2019, at a redemption price of $49 million. Market conditions are such that the call is not expected to be exercised B. Management intended...

Bradley-Link’s December 31, 2021, balance sheet included the following items:

Bradley-Link’s December 31, 2021, balance sheet included the following items: Long-Term Liabilities ($ in millions) 9.6% convertible bonds, callable at 101 beginning in 2022, due 2025 (net of unamortized discount of $2) [note 8]........................................................................$198 10.4% registered bonds callable at 104 beginning in 2031, due 2035 (net of unamortized discount of $1) [note 8]............................................................................49 Shareholders’ Equity Equity—stock warrants........4 Note 8: Bonds (in part) The 9.6% bonds were issued in 2008 at 97.5 to yield 10%. Interest is paid semiannually on June...

Subjects