INTERMEDIATE ACCOUNTING(LL)-W/2 ACCESS
9th Edition
ISBN: 9781260180657
Author: SPICELAND
Publisher: MCG
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Chapter 14, Problem 14.15P
Early extinguishment; effective interest
• LO14–5
The long-term liability section of Twin Digital Corporation’s balance sheet as of December 31, 2017, included 12% bonds having a face amount of $20 million and a remaining discount of $1 million. Disclosure notes indicate the bonds were issued to yield 14%.
Interest expense is recorded at the effective interest rate and paid on January 1 and July 1 of each year. On July 1, 2018, Twin Digital retired the bonds at 102 ($20.4 million) before their scheduled maturity.
Required:
- 1. Prepare the
journal entry by Twin Digital to record the semiannual interest on July 1, 2018. - 2. Prepare the journal entry by Twin Digital to record the redemption of the bonds on July 1, 2018.
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On January 2, 2015, Sandhill Corporation issued $1,050,000 of 10% bonds at 97 due December 31,2024, Interest on the bonds is
payable annually each December 31. The discount on the bonds is also being amortized on a straight-line basis over the 10 years.
(Straight-line is not materially different in effect from the preferable "interest method.)
The bonds are callable at 102 (i.e, at 102% of face amount), and on January 2, 2020, Sandhill called $630.000 face amount of the
bonds and redeemed them.
Ignoring income taxes, compute the amount of loss, if any, to be recognized by Sandhill as a result of retiring the $630.000 of bonds in
2020. (Round answer to O decimal places, eg 38,548.)
Loss on redemptionS
Prepare the journal entry to record the redemption. (Round answers to O decimal places, eg. 38,548. If no entry is required, select "No
Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when…
Problem 14-2 (Algo) Effective interest; financial statement effects [LO14-2]
On January 1, 2021, Baddour, Inc., issued 10%, 12 year bonds with a face amount of $164 million. The bonds were priced at $144 million
to yield 12%. Interest is paid semlannually on June 30 and December 31. Baddour's fiscal year ends September 30.
Required:
1. What amount(s) related to the bonds would Baddour report in its balance sheet at September 30, 2021?
2 What amount(s) related to the bonds would Baddour report in its income statement for the year ended September 30, 2021?
3. What amount(s) related to the bonds would Baddour report in its statement of cash flows for the year ended September 30, 2021? In
which section(s) should the amount(s) appear?
(For all requirements, enter your answers in whole dollars.)
1.
Net bonds payable
Interest payable
2 Interest expense for fiscal 2021
3. Sale of bonds
Cash interest paid
Question 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
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(b)
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Chapter 14 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/2 ACCESS
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
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