On January 2, 2015, Grouper Corporation issued $2,050,000 of 10% bonds at 96 due December 31,...
On January 2, 2015, Grouper Corporation issued $2,050,000 of 10%
bonds at 96 due December 31, 2024. 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, 2020, Grouper called $1,230,000 face amount of the
bonds and redeemed them.
Ignoring income taxes, compute the amount of loss, if any, to be
recognized by Grouper as a result of retiring the $1,230,000 of
bonds in 2020. (Round answer to 0 decimal places, e.g.
38,548.)
| Loss on redemption | $ ???? |
Prepare the journal entry to record the redemption.
(Round answers to 0 decimal places, e.g. 38,548. If no
entry is required, select "No Entry" for the account titles and
enter 0 for the amounts. Credit account titles are automatically
indented when amount is entered. Do not indent
manually.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|
|
January 2, 2020 |
? |
||
|
? |
|||
|
? |
|||
|
? |
Homework Answers
Face value of bonds = 2050000
Discount on bonds payable = 2050000*4/100 = 82000
Carrying value of January 2020 = 2050000-41000 = 2009000
Carrying value of 1230000 face value bonds = 2009000*1230000/2050000 = 1205400
a) Loss on redemption = (1230000*1.01)-1205400 = 36900
b) Journal entry
| Date | account and explanation | Debit | Credit |
| Jan 2 | Bonds payable | 1230000 | |
| Loss on redemption | 36900 | ||
| Discount on bonds payable | 24600 | ||
| Cash | 1242300 |
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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 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...
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