al years ago Brant, Inc., sold $900,000 in bonds to the public. Annual cash interest of 9 percent ($81,000) was to be p The bonds were issued at a discount to yield 12 percent. At the beginning of 2019, Zack Corporation (a wholly owned ht) purchased $150,000 of these bonds on the open market for $171,000, a price based on an effective interest rate of ond liability had a carrying amount on that date of $780,000. Assume Brant uses the equity method to account intern ment in Zack. What consolidation entry would be required for these bonds on December 31, 2019 and December 31, 2021? (If no en equired for a transaction/event, select "No journal entry required" in the first account field. Round your intermedi calculations and final answers to nearest whole number.) w transaction list onsolidation Worksheet Entries

al years ago Brant, Inc., sold $900,000 in bonds to the public. Annual cash interest of 9 percent ($81,000) was to be p The bonds were issued at a discount to yield 12 percent. At the beginning of 2019, Zack Corporation (a wholly owned ht) purchased $150,000 of these bonds on the open market for $171,000, a price based on an effective interest rate of ond liability had a carrying amount on that date of $780,000. Assume Brant uses the equity method to account intern ment in Zack. What consolidation entry would be required for these bonds on December 31, 2019 and December 31, 2021? (If no en equired for a transaction/event, select "No journal entry required" in the first account field. Round your intermedi calculations and final answers to nearest whole number.) w transaction list onsolidation Worksheet Entries

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 9P

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On January 1, 2019, Brewster Company issued 2,000 of its 5-year, 1,000 face value, 11% bonds dated January 1 at an effective annual interest rate (yield) of 9%. Brewster uses the effective interest method of amortization. On December 31, 2023, Brewster extinguished the 2,000 bonds early through acquisition in the open market for 1,980,000. On July 1, 2022, Brewster issued 5,000 of its 6-year, 1,000 face value, 10% convertible bonds dated July 1 at an effective annual interest rate (yield) of 12%. The bonds are convertible at the option of the investor into Brewsters common stock at a ratio of 10 shares of common stock for each bond. Brewster uses the effective interest method of amortization. On July 1, 2023, an investor in Brewsters convertible bonds tendered 1,500 bonds for conversion into 15,000 shares of Brewsters common stock, which had a market value of 105 per share at the date of the conversion. Required: 1. Using the information about Brewster, answer the following questions: a. Were the 11% bonds issued at par, at a discount, or at a premium? Why? b. Is the amount of interest expense for the 11% bonds using the effective interest method of amortization higher in the first or second year of the life of the bond issue? Why? 2. Using the information about Brewster, explain the following: a. How is a gain or loss on early extinguishment of debt determined? Does the early extinguishment of the 11% bonds result in a gain or loss? Why? b. How does Brewster report the early extinguishment of the 11% bonds on the 2023 income statement? 3. Based on the information provided about Brewster, answer the following questions: a. Does recording the conversion of the 10% convertible bonds into common stock under the book value method affect net income? What is the rationale for the book value method? b. Does recording the conversion of the 10% convertible bonds into common stock under the market value method affect net income? What is the rationale for the market value method?
On July 1, 2019, Aldrich Company purchased as an available-for-sale security 200,000 face value, 9% U.S. Treasury notes for 194,000. The notes mature July 1, 2020, and pay interest semiannually on January 1 and July 1. The notes were sold on December 1, 2019, for 199,000. Aldrich normally uses straight-line amortization on all of its notes. In its income statement for the year ended December 31, 2019, what amount should Aldrich report as a gain on the sale of the available-for-sale security? a. 2,500 b. 3,500 c. 5,000 d. 6,000
Several years ago Brant, Inc., sold $950,000 in bonds to the public. Annual cash interest of 8 percent ($76,000) was to be paid on this debt. The bonds were issued at a discount to yield 10 percent. At the beginning of 2019, Zack Corporation (a wholly owned subsidiary of Brant) purchased $190,000 of these bonds on the open market for $211,000, a price based on an effective interest rate of 6 percent. The bond liability had a carrying amount on that date of $770,000. Assume Brant uses the equity method to account internally for its investment in Zack. What consolidation entry would be required for these bonds on December 31, 2019 and December 31, 2021?
Several years ago Brant, Inc., sold $950,000 in bonds to the public. Annual cash interest of 8 percent ($76,000) was to be paid on this debt. The bonds were issued at a discount to yield 12 percent. At the beginning of 2019, Zack Corporation (a wholly owned subsidiary of Brant) purchased $190,000 of these bonds on the open market for $211,000, a price based on an effective interest rate of 6 percent. The bond liability had a carrying amount on that date of $810,000. Assume Brant uses the equity method to account internally for its investment in Zack. a. & b. What consolidation entry would be required for these bonds on December 31, 2019 and December 31, 2021? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations and final answers to nearest whole number.)
Several years ago Brant, Inc., sold $960,000 in bonds to the public. Annual cash interest of 9 percent ($86,400) was to be paid on this debt. The bonds were issued at a discount to yield 12 percent. At the beginning of 2019, Zack Corporation (a wholly owned subsidiary of Brant) purchased $120,000 of these bonds on the open market for $141,000, a price based on an effective interest rate of 7 percent. The bond liability had a carrying amount on that date of $820,000. Assume Brant uses the equity method to account internally for its investment in Zack. a. & b. What consolidation entry would be required for these bonds on December 31, 2019 and December 31, 2021? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations and final answers to nearest whole number.) No 1 2 Answer is complete but not entirely correct. Accounts Date December 31, 201 Bonds payable Interest income Investment in bonds…
Several years ago Brant, Inc., sold $960,000 in bonds to the public. Annual cash interest of 7 percent ($67,200) was to be paid on this debt. The bonds were issued at a discount to yield 10 percent. At the beginning of 2019, Zack Corporation (a wholly owned subsidiary of Brant) purchased $120,000 of these bonds on the open market for $141,000, a price based on an effective interest rate of 5 percent. The bond liability had a carrying amount on that date of $820,000. Assume Brant uses the equity method to account internally for its investment in Zack. a. & b. What consolidation entry would be required for these bonds on December 31, 2019 and December 31, 2021? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations and final answers to nearest whole number.) Answer is complete but not entirely correct. No Date 1 December 31, 201 Bonds payable Interest income 2 Accounts Loss on retirement of…