Suppose serials bonds with face value of P1,000,000 scheduled to be retired on December 31, 2024 are retired at 104 on December 31, 2022, two years prior to their redemption date, what amount should Elizabeta report in its 2022 income statement as gain (loss) on early extinguishment of debt?

Suppose serials bonds with face value of P1,000,000 scheduled to be retired on December 31, 2024 are retired at 104 on December 31, 2022, two years prior to their redemption date, what amount should Elizabeta report in its 2022 income statement as gain (loss) on early extinguishment of debt?

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

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 1MC

See similar textbooks

Related questions

Q: Presented below are two independent situations. (a) Novak Co. sold $2,080,000 of 12%, 10-year bonds…

A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question…

Q: On July 01, 2019, SALUDO RAW SA'YO SI MAGELLAN SABI NI LOLA CO. received P1,032,880 for P1,000,000…

A: Solution: Interest expense for the six months ended December 31, 2019 = Issue price * 10% *6/12 =…

Q: OK Company showed the following balances in connection with its noncurrent liabilities on December…

A: Interest expense refers to the cost which is incurred through entity for the funds borrowed and it…

Q: Anya Company disclosed the following accounts on December 31, 2020. 12%…

A: Journal entries refer to the process of systematic documentation of the financial transactions of a…

Q: Crane Electric sold $6,240,000, 10%, 10-year bonds on January 1, 2022. The bonds were dated January…

A: Solution: When bonds are redeemed before maturity date, difference between carrying value and…

Q: 9. On January 1, 2020, HIBISCUS Company purchased 4,000 of P1,000 face value, 10% bonds of IXORA…

A: Bonds are the debt security which is offered or issued by the corporates or the governments to…

Q: On January 1, 2018, Doty Co. redeemed its 15-year bonds of $7,000,000 par value for 102. They were…

A: Redmeption price = Bond Value * 102/100 Cash redeemed = 92/100 * bond Value

Q: On June 31, 2016, Oriental Company had outstanding 8% P 1,000,000 face amount, 15-year bonds…

A: Bond can be defined as financial instruments which is a source of capital for the companies as well…

Q: Ignoring interest, compute the gain or loss. Loss on redemption $ Ignoring interest, record…

A: Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing…

Q: At December 31, 2021 the following balances existed on the books of Bulaga Corporation: Bonds…

A: Bond payable is the liability for the company on which the interest has to be paid by the company.…

Q: In 2022, Dvorak Company issued $200,000 of bonds for $189,616. If the stated rate of interest was 6%…

A: Note: Under effective interest method, interest expense is calculated by multiplying the yield or…

Q: On June 30, 2021, Omara Co. had outstanding 8%, P3,000,000 face amount, 15-year bonds maturing on…

A: Carrying Amount :— It refers to face value plus unamortized premiums less unamortized discount.…

Q: On January 1, 2020, Wildhorse Company purchased 8% bonds having a maturity value of $360,000, for…

A: Bond amortization schedule is as under:

Q: On January 1, 2021, Crane Company redeemed its 15-year bonds of $6900000 par value for 101. They…

A: Step 1: Compute the total discount on bonds payable: Total discount on bonds…

Q: On January 1, 2020, Lucas Company purchased P1,200,000, 14% bonds of Andres Company for P1,381,934,…

A: Ending balance of Bond Investment = Beginning Balance + Interest Accrued at Effective rate -…

Q: On its December 31, 2020 balance sheet, Coronado Industries reported bonds payable of $6100000. The…

A: Meaning of call Premium: Call premium is the dollar amount over the par value of callable debt…

Q: Presented below are two independent situations. a. George Gershwin Co. sold $2,000,000 of 10%,…

A: a. Determine the amount of interest expense to be reported on July 1, 2020, and December 31, 2020.…

Q: The premium on an outstanding 12% P5,000,000 bonds payable was amortized for P46,675 during 2023,…

A: Working note: Computation of interest rate:

Q: Cookie Dough Corporation issued $850,000 in 9%, 10-year bonds (payable on December 31, 2030) on…

A: Amortization of bond: The process of allocation and reduction of the discount or premium on bonds to…

Q: On December 31, 2020, ABC Co. had outstanding 12%, P5,000,000 face value bonds maturing on December…

A: Bond conversion: The process of in which the changing of a bond takes into shares is said to bond…

Q: On January 1, 2020, Oriole Company purchased 12% bonds, having a maturity value of $ 310,000 for $…

A: Bonds- Bonds are those monetary securities that are issued by banks, governments, companies so as to…

Q: On January 1, 2020, Kabond issued a 3-year bond with conversion feature, 9% P1,000,000 at par.…

A: Conversion feature P1000000 9% of P1000000 P90000 Rate per Year (90/3) P30000 Total value…

Q: On September 1, 2022, when the prevailing market rate on similar instruments was at 5%, ABC…

A: DEF Corporation acquired P 50,00,000 bonds of Y company in 1st September 2022. The bonds will be…

Q: On January 1, 2020, Linen Corp. issued $450,000 (face value), 10%, ten-year bonds at 103. The bonds…

A: Bond issued= $450,000, 10% at 103 Callable price=105 Repurchased bonds= $100,000 at 96 Interest…

Q: On January 1, 2021, Aruba Company reported bonds payable of P5,000,000 and a related unamortized…

A: Bond: It is long-term source of finance issued by the firm to raise money. It has a fixed maturity…

Q: On January 1, 2022, Isabel Company purchased bonds with face amount of P8,000,000 for P7,679,000 to…

A: The question is based on the concept of Financial Instruments. Financial Assets are investment…

Q: The issue price of the 3,000 5-year, P1,000 face value bonds on January 1, 2021 is The carrying…

A: As per our protocol we provide solution to the one question or up to first three sub-parts only but…

Q: On January 1, 2020, HIBISCUS Company purchased 4,000 of ₱1,000 face value, 10% bonds of IXORA…

A: The coupon interest rate is always paid on the face value of the bonds and is independent of the…

Q: On January 1, 2020, Teal Company purchased 9% bonds having a maturity value of $370,000, for…

A: Interest receivable = face value of investment x interest rate = 370,000 x 9% = $33300

Q: On January 1, 2020, Bobond issued a 3-year, 9% P1,000,000 at par. Interest is payable semi-annually…

A: A bond seems to be a sort of financial instrument used by a business to borrow money. A bondholder…

Q: On July 01, 2019, SALUDO RAW SA'YO SI MAGELLAN SABI NI LOLA CO. received P1,032,880 for P1,000,000…

A: Market rate of interest = 10%/2 Market rate of interest = 5%

Q: On January 1,2020, ABC Corporation issued a 5-year, 10%, 1,000 of the P 5,000 face value bonds with…

A: Carrying value of the bonds retired as of December 31, 2022 = Present value of principal + Present…

Q: re on January 1, 2032, but were redeemable at 101 any time after December 31, 2025. Interest was…

A: A bond is a fixed-income security that reflects an investor's debt to a borrower.

Q: On January 1, 2023, Baker Company purchased, as an investment, 5% bonds, having a maturity value of…

A: The Baker Co. purchased 5% bonds at discount of 11,600 [150,000-138,400]. The…

Q: On January 1, 2020, Monty Company purchased 12% bonds, having a maturity value of $310,000 for…

A: a. Prepare the journal entry at the date of the bond purchase. b. Prepare the journal entries to…

Q: Duncan Manufacturing Inc. has $210,000 of 6% debenture bonds outstanding. The bonds were issued at…

A: Answer to Requirement 1: Face Value of Bonds = $210,000 Issue Value of Bonds = 111% * Face Value of…

Q: On June 30, 2020, Kikiam Inc. had outstanding 8%, P3,000,000 face amount, 15-year bonds maturing on…

Q: On July 1, 2018, Miniature Company has bonds with balances as shown below. Bonds Payable…

A: Par value of Bonds payable: $65,000 Bonds with a par value of $65,000 are carrying a discount of…

Q: On June 30, 2021, Waterway Industries had outstanding 8%, $8020000 face amount, 15-year bonds…

Q: bonds

A: Increase in equity = (Cash received on issue of convertible bonds- Interest payments) - (Cash…

Q: On January 1, 2020, ABC purchased bonds with a par value of $ 700,000 for $ 666,633. The nominal…

A: Date Beginning Balance Interest Income receivable Bond Amortization Interest Income Ending balance…

Q: Prepare the journal entry to record the interest revenue and the amortization at December 31, 2020.…

A: Solution:- Preparation of journal entry as follows under:- Working notes:- Interest Revenue for 2020…

Q: On January 1, 2020, Teal Company purchased 9% bonds having a maturity value of $370,000, for…

A: Increase in assets should be debited and decrease in assets should be credited.

Q: On January 1, 2020, Hummer Company purchased 5% bonds, havinga maturity value of $500,000, for…

A: Bonds: Bonds are debt instruments issued by the borrower company to its lenders. Bonds are issued…

Q: On January 1, 2019, Assarain Concrete issued bonds with a face value of OMR 100,000 at 97, due in…

A: Total discount on bonds = Face value of bonds x (Par value - issue price) / par value = OMR 100,000…

Q: On October 1, 2019, Rupert Limited sold a 4% six-year, $20 million bond at 94.92, providing a yield…

A: Answer with all necessary workings are as follows.

Q: On its December 31, 2021 statement of financial position, Emig Corp. reported bonds payable of…

A: Lets understand the basics. For determining extinguishment of debt, we need to use below formula.…

Q: Presented below are two independent situations. (a) Oriole Co. sold $1,840,000 of 12%, 10-year bonds…

Q: Olay Inc. issues $50,000, 8%, 10-year bonds payable on January 1, 2020. Calculate the selling price…

Question

Suppose serials bonds with face value of P1,000,000 scheduled to be retired on December 31, 2024 are retired at 104 on December 31, 2022, two years prior to their redemption date, what amount should Elizabeta report in its 2022 income statement as gain (loss) on early extinguishment of debt?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

Refer to the information in RE13-5. Assume that on December 31, 2019, the investment in Smith Corporation bonds has a market value of 12,500. Prepare the year-end journal entry to record the unrealized gain or loss.
Bats Corporation issued 800,000 of 12% face value bonds for 851,705.70. The bonds were dated and issued on April 1, 2019, are due March 31, 2023, and pay interest semiannually on September 30 and March 31. Bats sold the bonds to yield 10%. Required: 1. Prepare a bond interest expense and premium amortization schedule using the straight-line method. 2. Prepare a bond interest expense and premium amortization schedule using the effective interest method. 3. Prepare any adjusting entries for the end of the fiscal year, December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. Assume the company retires the bonds on June 30, 2020, at 103 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight-line method of amortization b. effective interest method of amortization
Naval Inc. issued $200,000 face value bonds at a discount and received $190,000. At the end of 2018, the balance in the Discount on Bonds Payable account is $5,000. This years balance sheet will show a net liability of ________. A. $200,000 B. $180,000 C. $195,000 D. $205,000
Short-Term Debt Expected to Be Refinanced On December 31, 2019, Excello Electric Company had 1 million of short-term notes payable due February 7, 2020. Excello expected to refinance these notes on a long-term basis. On January 15, 2020, the company issued bonds with a face value of 900,000 for 882,000. On January 22, 2020, the proceeds from the bond issue plus additional cash held by Excello on December 31, 2019, were used to liquidate the 1 million of short-term notes. The December 31, 2019, balance sheet is issued on February 12, 2020. Required: Prepare a partial balance sheet as of December 31, 2019, showing how the 1 million of short-term notes payable should be disclosed. Include an appropriate footnote for proper disclosure.
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?
Wilbury Corporation issued 1 million of 13.5% bonds for 985,071.68. The bonds are dated and issued October 1, 2019, are due September 30, 2020, and pay interest semiannually on March 31 and September 30. Assume an effective yield rate of 14%. Required: 1. Prepare a bond interest expense and discount amortization schedule using the straight-line method. 2. Prepare a bond interest expense and discount amortization schedule using the effective interest method. 3. Prepare adjusting entries for the end of the fiscal year December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. If income before interest and income taxes of 30% in 2020 is 500,000, compute net income under each alternative. 5. Assume the company retired the bonds on June 30, 2020, at 98 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight line method of amortization b. effective interest method of amortization 6. Compute the companys times interest earned (pretax operating income divided by interest expense) for 2020 under each alternative.
Chung Inc. issued $50,000 of 3-year bonds on January 1, 2018, with a stated rate of 4% and a market rate of 4%. The bonds paid interest semi-annually on June 30 and Dec. 31. How much money did the company receive when the bonds were issued? The bonds would be quoted at what rate?