Question

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

$_______________

Answer 1

1. Answer: $ 15,600 GAIN on early retirement bonds.

Explanation:

	Particulars	Amount($)
A.	Face value of bonds outstanding at Dec 31,2020	600,000
B	% bonds early retired	60%
C(A*B)	value of bond retired	360,000
D(C*104%)	bond retired at a value of $ 104	374,400
E=C-D	loss on early retirement	(14,400)
F	60%discount on bonds payable	30,000
G=E-F	Gain on early retirement bonds	$15,600

2).

Answer: interest expense for 12/31/23 is $ 289,980.16

computation working for interest expense for 12/31/2023:

Period ending	beginning of period net book value($)	Interest expense($)	Amount of payment($)	Premium on amortization($)	End of period net book value($)
31/12/20	3,805,200.00	304,416.00	360,000	55,584.00	3,749,616.00
31/12/21	3,749,616.00	299,969.28	360,000	60,030.72	3,689,585.28
31/12/22	3,689,585.28	295,166.82	360,000	64,833.18	3,624,752.10
31/12/23	3,624,752.10	289,980.16	360,000	70,019.83	3,554,732.26