Early Extinguishment debt
When the debt obligations are retired before its scheduled maturity date, the transactions are referred to as early extinguishment of debt. The debt is paid at the market price of the debt and for any difference between the book value of the debt with its market price, the business recognizes the gain or loss on early extinguishment of the debt.
Effective interest rate of amortization bond
Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but a constant percentage rate.
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INTERMEDIATE ACCOUNTING (ACCT 3200A)
- v2.cengagenow.com 403114 Discount Amortization On the first day of the fiscal year, a company issues a $1,100,000, 7%, 7-year bond that pays semiannual interest of $38,500 ($1,100,000 x 7% x 1/2), receiving cash of $1,041,903. Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.arrow_forwardQUESTION 9 A company has bonds outstanding with a parvalue of $100.000, The unamortized premium on these bonds is $3.500. The company callis these bonds at a price of $102.000, the gain or loss on retirement is: ie AAnswersarrow_forwardExercise 14-23 (Algo) Early extinguishment [LO14-5] The balance sheet of River Electronics Corporation as of December 31, 2023, included 12.50% bonds having a face amount of $91.8 million. The bonds had been issued in 2016 and had a remaining discount of $4.8 million at December 31, 2023. On January 1, 2024, River Electronics called the bonds before their scheduled maturity at the call price of 105. Required: Prepare the journal entry by River Electronics to record the redemption of the bonds at January 1, 2024. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.arrow_forward
- View Policies Current Attempt in Progress Hoffman Corporation retires its bonds at 106 on January 1, following the payment of annual interest. The face value of the bonds is $400,000. The carrying value of the bonds at the redemption date is $419,800. The entry to record the redemption will include a O debit of $19,800 to Premium on Bonds Payable. O credit of $4,200 to Gain on Bond Redemption. O debit of $24,000 to Premium on Bonds Payable. O credit of $19,800 to Loss on Bond Redemption. eTextbook and Media Save for Later Attempts: 0 of 2 used Submit Answerarrow_forwardProblem 10.5A (Static) Bond Interest (Bonds Issued at Face Value) (LO10-5) Green Mountain Power Company obtained authorization to issue 20-year bonds with a face value of $10 million. The bonds are dated May 1, 2021, and have a contract rate of interest of 10 percent. They pay interest on November 1 and May 1. The bonds were issued on August 1, 2021, at 100 plus three months' accrued interest Required: Prepare the necessary journal entries in general journal form on the following a. August 1, 2021, to record the issuance of the bords. b. November 1, 2021, to record the first semiannual interest payment on the bond issue. c. December 31, 2021, to record interest expense accrued through year-end. (Round to the nearest dollar) d. May 1, 2022, to record the second semiannual interest payment. (Round to the nearest dollar) e. What was the prevailing market rate of interest on the date that the bonds were issued? (If no entry is required for a transaction/event, select "No journal entry…arrow_forwardRequired information Exercise 9-11B Record bonds issued at a discount and related semiannual interest (LO9-6) [The following information applies to the questions displayed below] On January 1, Year 1, a company issues $500,000 of 6% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year. Assuming the market interest rate on the issue date is 7%, the bonds will issue at $446,611. Exercise 9-11B Part 2 2. Record the bond issue on January 1, Year 1, and the first two semiannual interest payments on June 30, Year 1, and December 31, Year 1. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Round your final answers to the nearest whole dollar.) View transaction list Journal entry worksheet 1 2 3 Record the bond issue. Note: Enter debits before credits. Date General Journal Debit Credit January 01 Cash 446,611 Discount on Bonds Payable Bonds Payable Record entry Clear entry View…arrow_forward
- Problem 5-15 (Algo) Bonds and leases; deferred annuities [LO5-3, 5-8, 5-10] On the last day of its fiscal year ending December 31, 2024, the Safe & Reliable (S&R) Glass Company completed two financing arrangements. The funds provided by these initiatives will allow the company to expand its operations. 1. S&R issued 7% stated rate bonds with a face amount of $100 million. The bonds mature on December 31, 2044 (20 years). The market rate of interest for similar bond issues was 8% (4.0% semiannual rate). Interest is paid semiannually (3.5%) on June 30 and December 31, beginning on June 30, 2025. 2. The company leased two manufacturing facilities. Lease A requires 20 annual lease payments of $360,000 beginning on January 1, 2025. Lease B also is for 20 years, beginning January 1, 2025. Terms of the lease require 17 annual lease payments of $380,000 beginning on January 1, 2028. Generally accepted accounting principles require both leases to be recorded as liabilities for the present value…arrow_forwardExercise 14-11 (Algo) Straight-Line: Bond computations, amortization, and bond retirement LO P2, P4 On January 1, 2021, Shay Company issues $270,000 of 9%, 15-year bonds. The bonds sell for $261,900. Six years later, on January 1, 2027, Shay retires these bonds by buying them on the open market for $283,500. All interest is accounted for and paid through December 31, 2026, the day before the purchase. The straight-line method is used to amortize any bond discount. 1. What is the amount of the discount on the bonds at issuance? 2. How much amortization of the discount is recorded on the bonds for the entire period from January 1, 2021, through December 31, 2026? 3. What is the carrying (book) value of the bonds as of the close of business on December 31, 2026? 4. Prepare the journal entry to record the bond retirement.arrow_forwardQuestion 8 of 17 (a) On June 1, 2020, Bramble Corp. issued $8,320,000, 6% bonds for $8,154,640, which includes accrued interest. Interest is payable semiannually on February 1 and August 1 with the bonds maturing on February 1, 2030. The bonds are callable at 102. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Debit Credit Date Account Titles and Explanation June 1 Attempts: 0 of 1 used Submit Answer Save for Later (b) MacBook Air !!arrow_forward
- P 16 On 1/10/2019 ABC company issued a $120,000, 12%, 4 years bonds. The bonds pay interest quarterly on 1/1 , 1/4,1/7 , and 1/10. The bonds were issued for 136,293.25, since the market rate was equal 8%. On 1/5 / 2021 the company called 75% of its outstanding at 102² Required: Based on the above given information, answer the following question: (a) What is the amount of interest expense that must be presented on ABC" Company income statement for the year ended December, 31, 2019? (b) What is the bond's carrying value that must be presented on the statement of financial position as on December, 31, 2020? (c) Prepare ALL the required journal entries for the year 2021.arrow_forwardq12. BTS Company failed to amortize discount on outstanding 10-year bonds payable. What is the effect of the failure to record amortization on interest expense, profit and bond carrying value, respectively?A. understate, overstate, understateB. overstate, understate, overstateC. understate, overstate, overstateD. overstate, understate, understatearrow_forward2 pts Lahey Corporation retires its $800,000 face value bonds at 105 on January 1, following the payment of annual interest. The carrying value of the bonds at redemption date is $829,960. The entry to record the redemption will include a O credit of $10,040 to Loss on Bond Redemption O debit of $10,040 to Premium on Bonds Payable O credit of $10,040 to Premium on Bonds Payable O debit of $10,040 to Loss on Bond Redemption 79°F Rain to starrow_forward
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning