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 income taxes and assuming that the gain is material,
Marigold should report this reacquisition as
| a gain of $158300. |
| a gain of $206300. |
| a loss of $206300. |
| a loss of $158300. |
Homework Answers
Ans:On Jan 1,2012 issue price= $18,000,000*104/100
= $ 18,720,000
Premium= $18,720,000-18,000,000
=$ 720,000
No of period= 10 years
Amortization per year= $72,000
for 7 years amortization= $72,000*7 (2012-2018: 7 years)
= $ 504,000
For 3 years amortization = $72,000*3
=$216,000
on Dec 31,2018:
Carrying value of goods= $18,720,000-504,000
= $18,216,000
Proportion value of goods= $18,216,000*4,010,000)/18,000,000
=$ 4,058,120
Repurchase price= $4010,000*97%
=$ 3,889,700
Gain on repurchase= 4,058,120-3,889,700
= $ 168,420
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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.
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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...
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