MCGEE Company issued $650,000 face value bonds at a discount of $11,000. The bonds contain a...
MCGEE Company issued $650,000 face value bonds at a discount of $11,000. The bonds contain a call provision of 101. MCGEE decides to redeem the bonds due to a significant decline in interest rates. On that date, MCGEE had amortized only $2,500 of the discount.
Required:
1. Calculate the gain or loss on the early
redemption of the bonds. Enter the amount as positive number. Round
your answer to the nearest whole dollar.
$ Loss
2. Calculate the gain or loss on the redemption
assuming that the call provision is 98 instead of 101. Enter the
amount as positive number. Round your answer to the nearest whole
dollar.
$ Gain
3. Select where the gain or loss should be
presented on the financial statements.
Income Statement
Homework Answers
| 1 | ||
| Amount paid for redemption | 656500 | =650000*1.01 |
| Less: Carrying value of bonds | 641500 | =650000-(11000-2500) |
| Loss on redemption of the bonds | 15000 | |
| 2 | ||
| Amount paid for redemption | 637000 | =650000*0.98 |
| Less: Carrying value of bonds | 641500 | =650000-(11000-2500) |
| Gain on redemption of the bonds | 4500 | |
| 3 | ||
| On Income Statement |
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MCGEE Company issued $650,000 face value bonds at a discount of
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Exercise 14-12
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Exercise 14-12
On January 2, 2012, Waterway Corporation issued $1,100,000 of
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preferable “interest method”.)
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Required:
Refer to the tables above for present value factors.
1. Prepare a five-year table to amortize the
discount using the effective interest method.
Note: Round the 12/31/18 interest expense and discount amortized...
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On January 2, 2015, Stellar Corporation issued $1,550,000 of 10%
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annually each December 31. The discount on the bonds is also being
amortized on a straight-line basis over the 10 years.
(Straight-line is not materially different in effect from the
preferable “interest method.”)
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on January 2, 2020, Stellar called $930,000 face amount...
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annually each December 31. The discount on the bonds is also being
amortized on a straight-line basis over the 10 years.
(Straight-line is not materially different in effect from the
preferable “interest method.”)
The bonds are callable at 101 (i.e., at 101% of face amount), and
on January 2, 2020, Marin called $1,290,000 face amount of the...
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are issued at 98. (Credit account titles are
automatically indented when the amount is entered. Do not indent
manually.)
Account Titles and Explanation
Debit
Credit
enter an account title
enter a debit amount
enter a credit amount
enter an account title
enter a debit...
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(Straight-line is not materially different in effect from the
preferable “interest method”.)
The bonds are callable at 101 (i.e., at 101% of face amount), and
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