INTERMEDIATE ACCOUNTING COMBO
9th Edition
ISBN: 9781260361995
Author: SPICELAND
Publisher: MCG
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Chapter 14, Problem 14.14P
To determine
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.
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ACC298 Timed Practice
Problem 1:
Delish Company issued $500,000, 10%, 5-year bonds on January 1, 2022 for $480,000. Interest is payable
annually on January 1. The company uses the straight-line method to amortize any bond premium or
discount.
Instructions:
(a) Did these bonds issue at a Premium or at a Discount?
(b) Prepare the journal entry to record the issuance of the bonds.
(c) Calculate the amount of the first interest payment.
(d) Calculate the amount of interest expense Delish would record on Dec. 31, 2022.
(b)
(c)
Chapter 10
#7 ABC Company purchased bonds with a face amount of $1200000 between interest payment dates. ABC purchased the bonds at 102, paid brokerage costs of $15800, and paid accrued interest for three months of $25800. The amount to record as the cost of this long-term investment in bonds is
$1239800.
$1200000.
$1224000.
$1265600.
eBook
20Y2
Entries for Issuing and Calling Bonds; Loss
Hoover Corp., a wholesaler of music equipment, issued $8,340,000 of 25-year, 8% callable bonds on March 1, 20Y2, at their face amount, with interest payable on March
1 and September 1. The fiscal year of the company is the calendar year.
Show Me How
Mar. 1 Issued the bonds for cash at their face amount.
Sept. 1 Paid the interest on the bonds.
20Y4
Sept. 1 Called the bond issue at 102, the rate provided in the bond indenture. (Omit entry for payment of interest.)
If an amount box does not require an entry, leave it blank.
Journalize the entries to record the above selected transactions.
Issued the bonds for cash at their face amount.
20Y2 Mar. 1
Paid the interest on the bonds.
20Y2 Sept. 1
eAssignmentSession Locator=&inprogress=false
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Called the bond issue at 102, the rate provided in the bond indenture. (Omit entry for payment of interest.)
2014 Sept. 1
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100
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Chapter 14 Solutions
INTERMEDIATE ACCOUNTING COMBO
Ch. 14 - How is periodic interest determined for...Ch. 14 - As a general rule, how should long-term...Ch. 14 - How are bonds and notes the same? How do they...Ch. 14 - What information is contained in a bond indenture?...Ch. 14 - On January 1, 2018, Brandon Electronics issued 85...Ch. 14 - How is the price determined for a bond (or bond...Ch. 14 - A zero-coupon bond pays no interest. Explain.Ch. 14 - Prob. 14.8QCh. 14 - Compare the two commonly used methods of...Ch. 14 - Prob. 14.10Q
Ch. 14 - When a notes stated rate of interest is...Ch. 14 - How does an installment note differ from a note...Ch. 14 - Prob. 14.13QCh. 14 - Prob. 14.14QCh. 14 - Air Supply issued 6 million of 9%, 10-year...Ch. 14 - Both convertible bonds and bonds issued with...Ch. 14 - Prob. 14.17QCh. 14 - Cordova Tools has bonds outstanding during a year...Ch. 14 - If a company prepares its financial statements...Ch. 14 - (Based on Appendix 14A) Why will bonds always sell...Ch. 14 - Prob. 14.21QCh. 14 - Prob. 14.22QCh. 14 - Prob. 14.23QCh. 14 - Bank loan; accrued interest LO132 On October 1,...Ch. 14 - Non-interest-bearing note; accrued interest LO132...Ch. 14 - Determining the price of bonds LO142 A company...Ch. 14 - Determining the price of bonds LO142 A company...Ch. 14 - Effective interest on bonds LO142 On January 1, a...Ch. 14 - Effective interest on bonds LO142 On January 1, a...Ch. 14 - Straight-line interest on bonds LO142 On January...Ch. 14 - Investment in bonds LO142 On January 1, a company...Ch. 14 - Note issued for cash; borrower and lender LO143...Ch. 14 - Note with unrealistic interest rate LO143 On...Ch. 14 - Installment note LO143 On January 1, a company...Ch. 14 - Prob. 14.12BECh. 14 - Bonds with detachable warrants LO145 Hoffman...Ch. 14 - Convertible bonds LO145 Hoffman Corporation...Ch. 14 - Reporting bonds at fair value LO146 AI Tool and...Ch. 14 - Bond valuation LO142 Your investment department...Ch. 14 - Determine the price of bonds in various situations...Ch. 14 - Determine the price of bonds; issuance; effective...Ch. 14 - Investor; effective interest LO142 (Note: This is...Ch. 14 - Bonds; issuance; effective interest; financial...Ch. 14 - Bonds; issuance; effective interest LO142 The...Ch. 14 - Prob. 14.7ECh. 14 - Investor; straight-line method LO142 (Note: This...Ch. 14 - Issuance of bonds; effective interest;...Ch. 14 - Issuance of bonds; effective interest;...Ch. 14 - Bonds; effective interest; adjusting entry LO142...Ch. 14 - Prob. 14.12ECh. 14 - Issuance of bonds; effective interest LO142...Ch. 14 - Prob. 14.14ECh. 14 - Error correction; accrued interest on bonds LO142...Ch. 14 - Error in amortization schedule LO143 Wilkins Food...Ch. 14 - Prob. 14.17ECh. 14 - Note with unrealistic interest rate; lender;...Ch. 14 - Prob. 14.19ECh. 14 - Prob. 14.20ECh. 14 - Installment note LO143 LCD Industries purchased a...Ch. 14 - Prob. 14.22ECh. 14 - Early extinguishment LO145 The balance sheet of...Ch. 14 - Convertible bonds LO145 On January 1, 2018, Gless...Ch. 14 - Prob. 14.25ECh. 14 - Convertible bonds; induced conversion LO145 On...Ch. 14 - Prob. 14.27ECh. 14 - Bonds with detachable warrants LO145 On August 1,...Ch. 14 - Reporting bonds at fair value LO146 (Note: This...Ch. 14 - Reporting bonds at fair value LO146 On January 1,...Ch. 14 - Reporting bonds at fair value; calculate fair...Ch. 14 - Prob. 14.32ECh. 14 - Troubled debt restructuring; debt settled ...Ch. 14 - Prob. 14.34ECh. 14 - Troubled debt restructuring; modification of...Ch. 14 - Prob. 14.36ECh. 14 - Determining the price of bonds; discount and...Ch. 14 - Effective interest; financial statement effects ...Ch. 14 - Prob. 14.3PCh. 14 - Bond amortization schedule LO142 On January 1,...Ch. 14 - Issuer and investor; effective interest;...Ch. 14 - Prob. 14.6PCh. 14 - Prob. 14.7PCh. 14 - Bonds; effective interest; partial period...Ch. 14 - Zero-co upon bonds LO142 On January 1, 2018,...Ch. 14 - Prob. 14.10PCh. 14 - Prob. 14.11PCh. 14 - Prob. 14.12PCh. 14 - Note and installment note with unrealistic...Ch. 14 - Prob. 14.14PCh. 14 - Early extinguishment; effective interest LO145...Ch. 14 - Prob. 14.16PCh. 14 - Prob. 14.17PCh. 14 - Early extinguishment LO145 The long-term...Ch. 14 - Convertible bonds; induced conversion; bonds with...Ch. 14 - Convertible bonds; zero coupon; potentially...Ch. 14 - Prob. 14.21PCh. 14 - Determine bond price; record interest; report...Ch. 14 - Report bonds at fair value; quarterly reporting ...Ch. 14 - Prob. 14.24PCh. 14 - Prob. 14.25PCh. 14 - Troubled debt restructuring Appendix B At January...Ch. 14 - Prob. 14.1BYPCh. 14 - Real World Case 142 Zero-coupon debt; HP Inc. ...Ch. 14 - Prob. 14.4BYPCh. 14 - Prob. 14.5BYPCh. 14 - Prob. 14.6BYPCh. 14 - Prob. 14.8BYPCh. 14 - Prob. 14.9BYPCh. 14 - Research Case 1410 FASB codification research;...Ch. 14 - Prob. 14.11BYP
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- REDEMPTION OF BONDS ISSUED AT FACE VALUE Levesque Lumber Co. issued 800,000 in bonds at face value 10 years ago and has paid semiannual interest payments through the years. (a) Assume the bonds are redeemed at face value. (b) Assume that 80,000 of the bonds are redeemed at 104. (c) Assume that 80,000 of the bonds are redeemed at 96. Prepare journal entries to record (a), (b), and (c).arrow_forwardREDEMPTION OF BONDS ISSUED AT A PREMIUM Brighton Unlimited sold bonds at a premium for 630,000 (premium of 30,000) eight years ago. (a) The corporation redeems 60,000 of this issue at 98. The unamortized premium is 600. (b) The corporation redeems 90,000 of this issue at 102. The unamortized premium is 900. Prepare journal entries to record the redemption in (a) and (b).arrow_forwardv2.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_forward
- 37 Cullumber Electric sold $7,680,000, 10%, 10-year bonds on January 1, 2022. The bonds were dated January 1, 2022, and paid interest annually on January 1. The bonds were sold at 98. a Prepare the journal entry to record the issuance of the bonds on January 1, 2022. 100A b At December 31, 2022, $15,360 of the Discount on Bonds Payable account has been amortized. Show the balance sheet presentation of the long-term liability at December 31, 2022. wor2 Tawo above Common c On January 1, 2024, when the carrying value of the bonds was $7,557,120, the company redeemed the bonds at 102. Record the redemption of the bonds assuming that interest for the period has already been paid. Stock, Common hadw a holt yd (beaU) bably Tawoft deco 350 38 On January 1, Stunt Corp. had outstanding convertible bonds with a face value of $1,000,000 and an unamortized discount of $100,000. On that date, the bonds were converted into 100,000 shares of $1 par stock. The market value on the date of conversion was…arrow_forwardExercise 10.9 (Algo) Accounting for Bonds Issued at a Premium: Issuance, Interest Payments, and Retirement (LO10-5, LO10-6) Xonic Corporation issued $8.5 million of 20-year, 8 percent bonds on April 1, 2021, at 102. Interest is paid on March 31 and September 30 of each year, and all of the bonds in the issue mature on March 31, 2041 Xonic's fiscal year ends on December 31. Prepare the following journal entries. a. April 1, 2021, to record the issuance of the bonds. b. September 30, 2021, to pay interest and to amortize the bond premium. c. March 31, 2041, to pay interest, amortize the bond premium, and retire the bonds at maturity (make two separate entries). Assume an adjusting entry was made on December 31, 2040, to recognize interest from October 1 to December 31. d. What is the effect of amortizing the bond premium on (1) annual net income and (2) annual net cash flow from operating activities. (ignore possible income tax effects.) (If no entry is required for a transaction/event,…arrow_forwardFnanciol ACCOunting Chapter 11 Page 32 12. On Juy 1,2020, Ward Company purchased 5,000 of the P1000 face value,o bonds of Jury Company for P4,614,000 to yiekd 10% per annum. The bonds,WN mature on JUly 1,2025, poy interest semiannually on Janvary 1 and JDIY 1. Wara Uses the interest method of amortization and the bonds are appropriarey Tecorded as an investment at amortized cost. The bonds should be reponed i Ward's December31,2020 statermentof financialpositionnat Q. 4,583,300 b,4న44,700 C. 4,675400 d. 4,969,300 106 0000 foce voue of Showarrow_forward
- Question 1 Gus Limited issued $32 million 7.5 percent, 5 year bonds on October 1, 2022. The market rate of interest on the date of the issue was 8 percent. Interest is payable semi-annually on April 1 and October 1. The company's year- end is December 31. Required: a. Prepare journal entries to record all transactions during the first year the bonds are outstanding. The company uses the straight-line method of amortizations. b. In good presentation style, indicate how the bond obligation would be shown on the company's year-end statement of financial position. C. How much interest expense is shown on the 2022 year end income statement? d. How much interest expense will be shown on the 2023 year end income statement?arrow_forwardPPODIENI2(TOPUIILS The Sleepy Corporation issued $1,000,000 of ten year bonds on January 1, 2019. The interest rate on the bonds is 9%, and the interest is paid semi-annually on July 1 and January of each year. The bonds were issued at 102. The straight-line method for amortizing discounts and premiums is used. a. Were the bonds issued at a discount or premium? b. Prepare the journal entries on 1. January 1, the date the bonds were issued December 31, 2019, for the year end journal entry to record interest expense and amortization of discount/premium 2. c. Calculate the total amount of interest expense on the 2019 income statement. d. Calculate the carry value of the bonds on December 31, 2019arrow_forwardQuestion 2 XYZ Corporation issues $1.000,000 of face value bonds that mature in 20 years at a discount on January 1, 2021. XYZ recelved a total of $960,000 on January 1, 2021. The contractual interest rate for the bonds is 6% and the market rate of interest at the date of issue is 7%. Using the straight-line method, what is the total amount of interest experise, including amortization of the discount, that XYZ should recognize on December 31, 2021 when XYZ accrues the interest on the bonds for 20217 O $70,000. O $62.000, O $58,000. O $60,000.arrow_forward
- Question 9 Vadercat Limited issued $15 million 4.0 percent, 8 year bonds on September 1, 2023. The market rate of interest on the date of the issue was 4.5 percent. Interest is payable semi-annually on March 1 and September 1. The company's year-end is December 31. Required: a. Prepare all journal entries required to record the bonds in the company's financial records for the first full year the bonds are outstanding. The company uses the straight-line method of amortizations. b. Indicate how the bond obligation would be shown on the company's year-end statement of financial position. c. How much interest expense, related to this security, is shown on the 2023 year end income statement? d. How much interest expense, related to this security, will be shown on the 2024 year end income statement?arrow_forwardView Policies Current Attempt in Progress A $650000 bond was retired at 102 when the carrying value of the bond was $677000. The entry to record the retirement would include a O loss on bond redemption of $14000. O loss on bond redemption of $13000. O gain on bond redemption of $13000. O gain on bond redemption of $14000. eTextbook and Media Save for Later Attempts: 0 of 2 used Submit Answer 3 5 6 7 8 9 e h b in marrow_forwardView 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_forward
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