Homework Answers
| REQUIRED 1 : | ||
| To calculate the premium on bond : | ||
| market price or cash received | $ 303,000 | |
| ( face value * issue price ) | ||
| ($300,000 * 1.01 ) | ||
| less: Face value of bonds | ($ 300,000) | |
| premium on bond | $ 3000 | |
| Amortization of bond premium = | $ 300 per interest payment | |
| (3000 / 10 periods ) | ||
| Face value of the bonds being retired | $ 300,000 | |
| Add: premium ($3,000 - ( $300 * 2 semiannual ) | $ 2,400 | |
| Carrying amount of bonds payable on the retirement date | $ 302,400 | |
| so, Platz company's carrying amount of the bonds payable on the retirement date is $ 302,400 | ||
| REQUIRED 2 : | ||
| Market price paid to retire the bonds | $ 276,000 | |
| ( face value of bonds * market price ) | ||
| ($ 300,000 * 0.92 ) | ||
| so, Cash must platz company pay to retire the bonds payable = $ 276,000 | ||
| REQUIRED 3 : | ||
| Carrying amount of bonds payable ( see required 1 ) | $ 302,400 | |
| less: Market price paid to retire the bonds | ($ 276,000) | |
| Gain on retirement of bonds payable | $ 26,400 | |
| so, Platz company 's gain on retirement of bonds payable is $ 26,400 | ||
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