Introduction:
Affiliate bonds purchased from non-affiliate: The consolidated entity, on the acquisition of an affiliate’s bond from non-affiliates, retires it at the time of purchase. The acquisition of an affiliate’s bonds by another company within the consolidated entity is referred to as constructive retirement.
Under constructive retirement, the gain or loss on retirement are shown in the consolidated income statement for the period, but not reported in the consolidated
To choose: The correct answer to determine gain or loss on retirement of bonds to be reported in 20X6 consolidated income statement.
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ADVANCED FINANCIAL ACCOUNTING IA
- Bonds Payable has a balance of $951,000 and Discount on Bonds Payable has a balance of $11,412. If the issuing corporation redeems the bonds at 98, what is the amount of gain or loss on redemption? a.$7,608 loss b.$7,608 gain c.$11,412 gain d.$11,412 lossarrow_forwardBonds Payable has a balance of $896,000 and Premium on Bonds Payable has a balance of $9,856. If the issuing corporation redeems the bonds at 103, what is the amount of gain or loss on redemption? a.$9,856 loss b.$17,024 loss c.$9,856 gain d.$922,880 gainarrow_forwardBonds Payable has a balance of $1,184,000 and Discount on Bonds Payable has a balance of $11,840. If the issuing corporation redeems the bonds at 97.5, what is the amount of gain or loss on redemption? a. $17,760 loss b. $11,840 loss c. $11,840 gain Od. $17,760 gainarrow_forward
- Bonds Payable has a balance of $1,000,000 and Discount on Bonds Payable has a balance of $15,500. If the issuing corporation redeems the bonds at 98 1/2, what is the amount of gain or loss on redemption? a. $500 loss Ob. $15,500 gain Oc. $500 gain Od. $15,500 loss 43 0 77777777777arrow_forwardBonds Payable has a balance of $1,200,000 and Premium on Bonds Payable has a balance of $18,750. If the issuing corporation redeems the bonds at 102, what is the amount of gain or loss on redemption? Multiple Choice $5,250 loss $42,750 gain $5,250 gainarrow_forwardQuestion Content Area The following information relates to the Davensmith Company: Interest payable, beginning of period $ 60 Bond discount amortization, end of period 40 Interest payable, end of period 10 Total interest expense reported on the income statement 850 Bond discount amortization, beginning of period 70 What was the amount of interest paid? $820 $870 $830 $850arrow_forward
- The amortization of premium on bonds payable will _____________ the net income. a. increaseb. decreasec. not affectd. offsetarrow_forward23.ABC Company acquired bonds for their par value between the date of interest collection. Accrued interest Select one: a. decrease the payment made to the seller. b. They represent an interest income that will be recorded on the date of interest collection. c. they are part of the payment made to the seller. d. they represent an expense in the acquisition of those bonds.arrow_forwardProblem 5-12 (AICPA Adapted) Zola Company had the following long-term debt: Bonds maturing in installments, secured by machinery Bonds maturing on a single date, secured by realty Collateral trust bonds 1,000,000 1,800,000 2,000,000 1. What is the total amount of debenture bonds? a. 2,000,000 b. 1,000,000 с. 1,800,000 d. 0. 2. What is total amount of secured bonds? a. 4,800,000 b. 2,800,000 c. 3,800,000 d. 3,000,000 190arrow_forward
- Compute bond proceeds, amortizing premium by interest method, and interest expense DATA Face amount of bonds Contract rate of interest Term of bonds, years Market rate of interest Interest payment REQUIRED: a. Compute the amount of cash proceeds from the sale of the bonds. $41,000,000 11% 3 9% Semiannual b. Compute the amount of premium to be amortized for the first semiannual interest payment period, using the interest method. c. Compute the amount of premium to be amortized for the second semiannual interest payment period, using the interest method. d. Compute the amount of the bond interest expense for the first year. Using formulas and cell references from the problem data, perform the required analysis. Formulas entered in the green cells show in the orange cells. Transfer amounts to CNOWv2 for grading. a. PV of cash proceeds b. Premium amortized for the 1st interest payment period c. Premium amortized for the 2nd interest payment period d. Interest expense for the 1st year…arrow_forwardPrepare a schedule of interest expense and bond amortization for 2025-2027. (Round answer to 2 decimal places, e.g. 38,548.25.) Date 1/1/25 $ 12/31/25 12/31/26 12/31/27 Cash Paid Schedule of Interest Expense and Bond Premium Amortization Effective-Interest Method $ Interest Expense $ Premium Amortized $ Carry Value ofarrow_forwardA $2,600 credit balance in the Premium on Bonds Payable account represents which of the following? Select one: a. An overpayment for a bond purchase b. An underpayment for a bond purchase c. The current amount of amortization expense d. The unamortized amount of premium earned on a bond issuearrow_forward
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,