Question

In: Accounting

At December 31, 2022, the following balances existed for MICPA Corporation: Bonds Payable (6%) $600,000 Discount...

  1. At December 31, 2022, the following balances existed for MICPA Corporation:

Bonds Payable (6%)

$600,000

Discount on Bonds Payable

50,000

The bonds mature on 12/31/28. Straight-line amortization is used.

If 60% of the bonds are retired at 104 on January 1, 2025, what is the gain or loss on early extinguishment?

Answer

$_______________

2.

On January 1, 2020, Scottsdale Company issued its 12% bonds in the face amount of $3,000,000, which mature on January 1, 2030. The bonds were issued for $$3,805,200 to yield 8%. Scottsdale uses the effective-interest method of amortizing bond premium. Interest is payable annually on December 31. The 12/31/23 Premium on Bond Payable balance is:

Answer

$_______________

Solutions

Expert Solution

1.

Bonds Payable =$600000

Discount on Bonds Payable = $50000

Time left to maturity of Bonds = 6 years

Straight line amortization = $50000/6 = $8333

Discount on Bond payable as on January 1, 2025 = $50000 - $8333*2 = $50000 - $16667 = $33333

Book Value of Bond as on January 1, 2025 = Bonds Payable - Discount on Bond payable as on January 1, 2025

= $600000 - $33333 = $566667

Book Value of Bonds retired as on January 1, 2025 = Total Book Value of Bond as on January 1, 2025*60% = $566667*60% = $340000

Cash paid to retire bonds as on January 1, 2025 = $360000 * 104% = $374400

Loss on early extinguishment = Cash paid to retire bonds as on January 1, 2025 - Book Value of Bonds retired as on January 1, 2025

= $374400- $340000= $34400

Answer: $34400

2.   

Interest payment = 3000000 * 12% = 360000

Effective method

Interest expenses = Bond book value at the beginning * market int. Rate

Dec 31, 20 = Interest expenses = 3805200 * 8% = 304416

Amortization on premium = Interest payment - Interest expenses

Bond premium balance = Bond premium beginning balance - Amortization on premium

Bond book value = Beginning book value - Amortization on premium

Date

Interest payment

Interest expenses

Amortization on premium

Bond premium balance

Bond book value

2020, Jan 1

805200

3805200

Dec 31, 20

360000

304416

55584

749616

3749616

Dec 31, 21

360000

299969

60031

689585

3689585

Dec 31, 22

360000

295167

64833

624752

3624752

Dec 31, 23

360000

289980

70020

554732

3554732

Calculation example for Dec 31, 2020

Interest expenses = Bond book value at the beginning * market int. Rate

Dec 31, 20 = Interest expenses = 3805200 * 8% = 304416

Amortization on premium = Interest payment - Interest expenses

360000 - 304416 = 55584

Bond premium balance = Bond premium beginning balance - Amortization on premium

805200 - 55584 = 749616

Bond book value = Beginning book value - Amortization on premium

3805200 - 55584 = 3749616

Ans:

The 12/31/23 Premium on Bond Payable balance is: $554732

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

At December 31, 2022, the following balances existed for MICPA Corporation: Bonds Payable (6%) $600,000 Discount...
At December 31, 2022, the following balances existed for MICPA Corporation: Bonds Payable (6%) $600,000 Discount on Bonds Payable 50,000 The bonds mature on 12/31/28. Straight-line amortization is used. If 60% of the bonds are retired at 104 on January 1, 2025, what is the gain or loss on early extinguishment? Answer $_______________
At December 31, 2022, the following balances existed for MICPA Corporation: Bonds Payable (6%) $600,000 Discount...
At December 31, 2022, the following balances existed for MICPA Corporation: Bonds Payable (6%) $600,000 Discount on Bonds Payable 50,000 The bonds mature on 12/31/28. Straight-line amortization is used. If 60% of the bonds are retired at 104 on January 1, 2025, what is the gain or loss on early extinguishment? Answer $_______________ 2. On January 1, 2020, Scottsdale Company issued its 12% bonds in the face amount of $3,000,000, which mature on January 1, 2030. The bonds were issued...
At December 31, 2022, the following balances existed for MICPA Corporation: Bonds Payable (6%) $600,000 Discount...
At December 31, 2022, the following balances existed for MICPA Corporation: Bonds Payable (6%) $600,000 Discount on Bonds Payable 50,000 The bonds mature on 12/31/28. Straight-line amortization is used. If 60% of the bonds are retired at 104 on January 1, 2025, what is the gain or loss on early extinguishment? Answer $_______________ 2. On January 1, 2020, Scottsdale Company issued its 12% bonds in the face amount of $3,000,000, which mature on January 1, 2030. The bonds were issued...
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?
The ledger of a company contained the following account balances on December 31: Accounts Payable $...
The ledger of a company contained the following account balances on December 31: Accounts Payable $ 15,200 Fees Income $ 190,000 Accounts Receivable 6,800 Supplies 5,200 Accumulated Depreciation 10,000 Prepaid Rent 66,000 Cash 92,000 Rent Expense 10,000 Depreciation Expense 10,000 Supplies Expense 9,200 Equipment 80,000 Teresa Davis, Capital 138,400 Teresa Davis, Drawing 58,000 Utilities Expense 16,400 All the accounts have normal balances. Prepare the December 31 closing entries.
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?...
Metlock Company has the following balances in selected accounts on December 31, 2022. Accounts Receivable $...
Metlock Company has the following balances in selected accounts on December 31, 2022. Accounts Receivable $ 0 Accumulated Depreciation—Equipment 0 Equipment 7,840 Interest Payable 0 Notes Payable 11,200 Prepaid Insurance 2,352 Salaries and Wages Payable 0 Supplies 2,744 Unearned Service Revenue 33,600 All the accounts have normal balances. The following information has been gathered at December 31, 2022. 1. Metlock Company borrowed $11,200 by signing a 12%, one-year note on September 1, 2022. Interest will be paid when the note...
Janson Corporation Co.'s trial balance included the following account balances at December 31, 2018: Accounts payable...
Janson Corporation Co.'s trial balance included the following account balances at December 31, 2018: Accounts payable $25,600 Bond payable, due 2027 24,200 Salaries payable 17,700 Note payable, due 2019 20,100 Note payable, due 2023 41,300 What amount should be included in the current liabilities section of Janson's December 31, 2018, balance sheet? Janson Corporation Co.'s trial balance included the following account balances at December 31, 2018: Accounts payable $25,600 Bond payable, due 2027 24,200 Salaries payable 17,700 Note payable, due...
On December 31, 2018, when the market interest rate is 8%, Arnold Corporation issues $200,000 of 6%, 10-year bonds payable
On December 31, 2018, when the market interest rate is 8%, Arnold Corporation issues $200,000 of 6%, 10-year bonds payable. The bonds pay interest semiannually. Determine the present value of the bonds at issuance.
The following information is available for Kingbird Corporation for the year ended December 31, 2022. Beginning...
The following information is available for Kingbird Corporation for the year ended December 31, 2022. Beginning cash balance $36,000 Accounts payable decrease 3,000 Depreciation expense 85,000 Accounts receivable increase 8,700 Inventory increase 14,100 Net income 298,500 Cash received for sale of land at book value 36,000 Sales revenue 740,500 Cash dividends paid 11,500 Income tax payable increase 4,200 Cash used to purchase building 147,500 Cash used to purchase treasury stock 38,800 Cash received from issuing bonds 203,000 Prepare a statement...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT