On January 1, 2012, Hernandez Corporation issued $18,000,000 of 10% ten-year bonds at 103. The bonds...
On January 1, 2012, Hernandez Corporation issued $18,000,000 of 10% ten-year bonds at 103. The bonds are callable at the option of Hernandez at 105. Hernandez has recorded amortization of the bond premium on the straight-line method (which was not materially different from the effective-interest method). On December 31, 2018, when the fair value of the bonds was 96, Hernandez repurchased $4,000,000 of the bonds in the open market at 96. Hernandez has recorded interest and amortization for 2018. Ignoring income taxes and assuming that the gain is material, Hernandez should report this reacquisition as
a. a loss of $196,000.
b. a gain of $196,000.
c. a loss of $244,000.
d. a gain of $244,000.
*I know that the answer is b, I am asking for an elaborate explanation of how to get to that answer including how to find the unamortized amount.
Homework Answers
Answer-
The balance in the premium on bond payable account is $162,000. The Premium balance was $540,000 (180000*3). On straight line basis, $54000 is amortised every year for 7 years leaving a balance of $162,000. Proportionate balance in premium account for $4,000,000 worth bonds is $36,000 (162,000*4,000,000/18,000,000). The Journal entry for repurchase of bonds is
Debit Bonds payable account $4,000,000
Debit Premium on bonds payable $36,000
Cash account $3,840,000
Gain on repurchase $196,000
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On January 1, 2012, Hernandez Corporation issued $18,000,000 of
10% ten-year bonds at 103. The bonds...
On January 1, 2012, Marigold Corp. issued $18000000 of 10% ten-year bonds at 104. The bonds...
On January 1, 2012, Marigold Corp. issued $18000000 of 10%
ten-year bonds at 104. The bonds are callable at the option of
Marigold at 106. Marigold has recorded amortization of the bond
premium on the straight-line method (which was not materially
different from the effective-interest method).
On December 31, 2018, when the fair value of the bonds was 97,
Marigold repurchased $4010000 of the bonds in the open market at
97. Marigold has recorded interest and amortization for 2018.
Ignoring...
Hi, I wanna know those questions how to solve step by step. I put solutions on...
Hi, I wanna know those
questions how to solve step by step.
I put solutions on the below, but I don't know where those
numbers came?
Is there any ways to calculate them more easily? Thank you.
89. c [BC1]
= $2,053,000 (CV of retired bonds)
$2,053,000
– ($2,000,000 × .98) = $93,000.
90. b [BC2]
= $4,036,000 (CV of retired bonds)
$4,036,000
– ($4,000,000 .96) = $196,000.
91. b $2,850,000
+ [($2,850,000 × .06) – ($3,000,000 × .05)] = $2,871,000 (CV of
bonds)
$2,871,000...
Exercise 14-12 On January 2, 2012, Headland Corporation issued $2,150,000 of 10% bonds at 98 due...
Exercise 14-12 On January 2, 2012, Headland Corporation issued $2,150,000 of 10% bonds at 98 due December 31, 2021. Interest on the bonds is payable 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, 2017, Headland called $1,290,000 face amount...
P15-8B Gabriel Corporation sold $4,000,000, 8 % , 10- year bonds on January 1, 2012. The...
P15-8B Gabriel Corporation sold $4,000,000, 8 % , 10- year bonds on January 1, 2012. The bonds were dated January 1, 2012, and pay interest on July 1 and January 1. Gabriel Corporation uses the straight-line method to amortize bond premium or discount. Assume no interest is accrued on June 30. Instructions (a) Prepare all the necessary journal entries to record the issuance of the bonds and bond interest expense for 2012, assuming that the bonds sold at 103. (b)...
On January 2, 2012, Concord Corporation issued $2,250,000 of 10% bonds at 98 due December 31,...
On January 2, 2012, Concord Corporation issued $2,250,000 of 10%
bonds at 98 due December 31, 2021. Interest on the bonds is payable
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 102 (i.e., at 102% of face amount), and
on January 2, 2017, Concord called $1,350,000 face amount of the...
Exercise 14-12 On January 2, 2012, Martinez Corporation issued $1,550,000 of 10 % bonds at 98...
Exercise 14-12 On January 2, 2012, Martinez Corporation issued $1,550,000 of 10 % bonds at 98 due December 31, 2021. Interest on the bonds is payable 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 (.e., at 101 % of face amount), and on January 2, 2017, Martinez called $930,000...
Extinguishment of Bonds Prior to Maturity On December 1, 2014, Cone Company issued its 8%, $530,000...
Extinguishment of Bonds Prior to Maturity On December 1, 2014, Cone Company issued its 8%, $530,000 face value bonds for $610,000, plus accrued interest. Interest is payable on November 1 and May 1. On December 31, 2016, the book value of the bonds, inclusive of the unamortized premium, was $560,000. On July 1, 2017, Cone reacquired the bonds at 99 plus accrued interest. Cone appropriately uses the straight-line method for the amortization because the results do not materially differ from...
Exercise 14-12 On January 2, 2012, Waterway Corporation issued $1,100,000 of 10% bonds at 98 due December 31, 2021. Inte...
Exercise 14-12
On January 2, 2012, Waterway Corporation issued $1,100,000 of
10% bonds at 98 due December 31, 2021. Interest on the bonds is
payable 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, 2017, Waterway called $660,000 face amount...
On January 1, 2012, Scott Corporation issued 10-year $100,000 bonds with a 6% stated rate of...
On January 1, 2012, Scott Corporation issued 10-year $100,000 bonds with a 6% stated rate of interest at 103. Scott Corporation pays the interest annually on December 31 and uses the straight-line amortization method. Which of the following is the correct general journal entry to record the interest expense for 2012? Debit Credit a. Interest Expense 6,000 Premium on Bonds Payable 300 Cash 5,700 b. Interest Expense 6,000 Cash 6,000 c. Interest Expense 6.300 Premium on Bonds Payable 300 Cash...
4) Atlantic Company issues 10-year bonds, as follows: Bonds are dated to be issued on: Bonds are ...
4) Atlantic Company issues 10-year bonds, as follows: Bonds are dated to be issued on: Bonds are issued on Par value of bonds: Stated annual interest rate: Price at date of issue: Semiannual interest payments: Bond issue costs incurred: Amortization method used: January 1, 20x1 June 1, 20x1 $900,000 4% 101.15 January 1 and July 1 $16,100 Straight-line Straight-line amortization of bond issue costs and premium or discount amortization are recorded once ayear, at year-end. SEE NEXT PAGE FOR REQUIREMENTS...
On January 1, 2012, Marigold Corp. issued $18000000 of 10%
ten-year bonds at 104. The bonds are callable at the option of
Marigold at 106. Marigold has recorded amortization of the bond
premium on the straight-line method (which was not materially
different from the effective-interest method).
On December 31, 2018, when the fair value of the bonds was 97,
Marigold repurchased $4010000 of the bonds in the open market at
97. Marigold has recorded interest and amortization for 2018.
Ignoring...
Hi, I wanna know those
questions how to solve step by step.
I put solutions on the below, but I don't know where those
numbers came?
Is there any ways to calculate them more easily? Thank you.
89. c [BC1]
= $2,053,000 (CV of retired bonds)
$2,053,000
– ($2,000,000 × .98) = $93,000.
90. b [BC2]
= $4,036,000 (CV of retired bonds)
$4,036,000
– ($4,000,000 .96) = $196,000.
91. b $2,850,000
+ [($2,850,000 × .06) – ($3,000,000 × .05)] = $2,871,000 (CV of
bonds)
$2,871,000...
P15-8B Gabriel Corporation sold $4,000,000, 8 % , 10- year bonds on January 1, 2012. The bonds were dated January 1, 2012, and pay interest on July 1 and January 1. Gabriel Corporation uses the straight-line method to amortize bond premium or discount. Assume no interest is accrued on June 30. Instructions (a) Prepare all the necessary journal entries to record the issuance of the bonds and bond interest expense for 2012, assuming that the bonds sold at 103. (b)...
On January 2, 2012, Concord Corporation issued $2,250,000 of 10%
bonds at 98 due December 31, 2021. Interest on the bonds is payable
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 102 (i.e., at 102% of face amount), and
on January 2, 2017, Concord called $1,350,000 face amount of the...
Exercise 14-12 On January 2, 2012, Martinez Corporation issued $1,550,000 of 10 % bonds at 98 due December 31, 2021. Interest on the bonds is payable 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 (.e., at 101 % of face amount), and on January 2, 2017, Martinez called $930,000...
Exercise 14-12
On January 2, 2012, Waterway Corporation issued $1,100,000 of
10% bonds at 98 due December 31, 2021. Interest on the bonds is
payable 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, 2017, Waterway called $660,000 face amount...
On January 1, 2012, Scott Corporation issued 10-year $100,000 bonds with a 6% stated rate of interest at 103. Scott Corporation pays the interest annually on December 31 and uses the straight-line amortization method. Which of the following is the correct general journal entry to record the interest expense for 2012? Debit Credit a. Interest Expense 6,000 Premium on Bonds Payable 300 Cash 5,700 b. Interest Expense 6,000 Cash 6,000 c. Interest Expense 6.300 Premium on Bonds Payable 300 Cash...
4) Atlantic Company issues 10-year bonds, as follows: Bonds are dated to be issued on: Bonds are issued on Par value of bonds: Stated annual interest rate: Price at date of issue: Semiannual interest payments: Bond issue costs incurred: Amortization method used: January 1, 20x1 June 1, 20x1 $900,000 4% 101.15 January 1 and July 1 $16,100 Straight-line Straight-line amortization of bond issue costs and premium or discount amortization are recorded once ayear, at year-end. SEE NEXT PAGE FOR REQUIREMENTS...
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