Question 152.5 ptsOn January 1, 2017, Jewels, Inc. sold $200,000 of its 12%, five-year bonds to yield 10%. Interestis paid each January 1 and July 1, and the effective interest method of amortization is used. OnMay 1, 2019, Jewels retired $100,000 of the bonds at 104. The book value of the bonds onDecember 31, 2018, was $212,926. The entry to record the retirement in May 2019 wouldinclude (rounded to the nearest dollar) :O debit to Loss on Bond Retirement for $4,024.O credit to Premium on Bonds Payable for $12,926.O debit to Interest Expense for $8,000.O a credit to Cash for $104,000.

Answered: The entry to record the retirement in…

Financial & Managerial Accounting

13th Edition

ISBN:9781285866307

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter12: Long-Term Liabilities: Bonds And Notes

Section: Chapter Questions

Problem 12.5BPR

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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.
Entries for issuing and calling bonds; loss Adele Corp., a wholesaler of music equipment, issued 22,000,000 of 20-year, 7% callable bonds on March 1, 2016 at their face amount, with interest payable on March 1 and September 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions: 2016 Mar. 1. Issued the bonds for cash at their face amount. Sept.l. Paid the interest on the bonds. 2020 Sept.l. Called the bond issue at 102, the rate provided in the bond indenture. (Omit entry for payment of interest.)
(Appendix 14.1)Pamlico Company has a 500,000, 15%, 3-year note dated January 1, 2019, payable to Forest National Bank. On December 31, 2020, the bank agreed to settle the note and unpaid interest of 75,000 for 50,000 cash and marketable securities having a current market value of 375,000. Pamlicos acquisition cost of the securities is 385,000. Ignoring income taxes, what amount should Pamlico report as a gain from the debt restructuring on its 2020 income statement? a. 65,000 b. 75,000 c. 140,000 d. 150,000

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The entry to record the retirement in May 2019 would ar):