Question

The following balances are from the statement of financial position of Merit Ltd Account 20X9 20X8 Bonds payable 7 %: $17.000,000 $20,000,000 Discount on bonds payable 152.500 116,800 ,000,000 Bonds payable, 65% 10,000,000 21,300 Discount on bonds payable 61.500 5.000,000 0 Bonds payable, 7.25% 132 000 0 Discount on bonds payable Page 954 Additional information a A portion of the 7% bond payable was retired at 101 Discount amortization of $14.700 was recorded during the year b. A portion of the 6.5% bond payable was retired at 97.5 Discount amortization of $5 200 was recorded during the year C. The 7 25% bond was issued in 20X9 in exchange for land. Discount amortization of $17 200 has been recorded during the year d Interest expense was $2,110 000 for the year Required: 1 Prepare statement of cash flows items in financing activities related to the bond issuance and retirement 2 Calculate the cash paid for interest in 20X9 3 Calculate the gain or loss on bond retirements in 20X9

Answer 1

1) Cash flow statement - Partial: 7% bonds retired ($20,000,000 - S17,000,000)*101/100 |6.5% bonds retired (S10,000,000 - S4,000,000)*97.5/100 |7.25% bonds issued for land but not for cash |Cash used for Financing activities relating to bond issue ($3,030,000) (S5,850,000) (S8,880,000) 2) Cash paid for interest: Interest expense for the year |Less: Discount amortization (S14,700 $5,200 $17,200) Cash paid for interest in 20X9 $2,110,000 (S37,100) $2,072,900 3) Gain or loss on bond retirement in 20X9: |Loss on retiring the 7% bonds (S20,000,000 - S17,000,000 |S3,030,000 S3,000,000 $30,000 (152,500 - $116,800 -| |$14,700)] |Gain on retirement of 6.5% bonds ($10,000,000 - $4,000,000 |= $6,000,000 - S5,850,000 $150,000 - (S61,500 - $5,200 S21,300) Net Gain on retirement of bonds in 20X9 (S51,000) $115,000 $64,000