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"At December 31, 2010 the following balances existed on the books of Foxworth Corporation: Bonds Payable $2,000,000 Discount on Bonds Payable 160,000 Interest Payable 50,000 Unamortized Bond Issue Costs 120,000 83. 84. 85. 86. 87. Long-Term Liabilities 14 - 19 If the bonds are retired on January 1, 2011, at 102, what will Foxworth report as a loss on redemption? a. $370,000 b. $320,000 c. $270,000 d. $200,000 This answer is B if that helps, I just need help solving. 88. At December 31, 2010 the following balances existed on the books of Rentro Corporation: Bonds Payable $1,500,000 Discount on Bonds Payable 120,000 Interest Payable 37,000 Unamortized Bond Issue Costs 90,000 If the bonds are retired on January 1, 2011, at 102, what will Rentro report as a loss on redemption? a. $150,000 b. $202,500 c. $240,000 d. $277,500 this answer is C, but how to arrive? 89. The December 31, 2010, balance sheet of Hess Corporation includes the following items: 9% bonds payable due December 31, 2019 $1,000,000 Unamortized premium on bonds payable 27,000 The bonds were issued on December 31, 2009, at 103, with interest payable on July 1 and December 31 of each year. Hess uses straight-line amortization. On March 1, 2011, Hess retired $400,000 of these bonds at 98 plus accrued interest. What should Hess record as a gain on retirement of these bonds? Ignore taxes. a. $18,800. b. $10,800. c. $18,600. d. $20,000. This answer is C 90. On January 1, 2004, Hernandez Corporation issued $4,500,000 of 10% ten-year bonds at 103. The bonds are callable at the option of Hernandez at 105. Hernandez has recorded amortization of the bond premium on the straight-line method (which was not materially different from the effective-interest method). On December 31, 2010, when the fair market value of the bonds was 96, Hernandez repurchased $1,000,000 of the bonds in the open market at 96. Hernandez has recorded interest and amortization for 2010. Ignoring income taxes and assuming that the gain is material, Hernandez should report this reacquisition as a. a loss of $49,000. b. a gain of $49,000. c. a loss of $61,000. d. a gain of $61,000. This answer is B 91. The 10% bonds payable of Nixon Company had a net carrying amount of $570,000 on December 31, 2010. The bonds, which had a face value of $600,000, were issued at a discount to yield 12%. The amortization of the bond discount was recorded under the effective-interest method. Interest was paid on January 1 and July 1 of each year. On July 2, 2011, several years before their maturity, Nixon retired the bonds at 102. The interest payment on July 1, 2011 was made as scheduled. What is the loss that Nixon should record on the early retirement of the bonds on July 2, 2011? Ignore taxes. a. $12,000. b. $37,800. c. $33,600. d. $42,000. B 92. A corporation called an outstanding bond obligation four years before maturity. At that time there was an unamortized discount of $300,000. To extinguish this debt, the company had to pay a call premium of $100,000. Ignoring income tax considerations, how should these amounts be treated for accounting purposes? a. Amortize $400,000 over four years. b. Charge $400,000 to a loss in the year of extinguishment. c. Charge $100,000 to a loss in the year of extinguishment and amortize $300,000 over four years. d. Either amortize $400,000 over four years or charge $400,000 to a loss immediately, whichever management selects. B,please answer as soon as you can.,Michael. In the answer you forwarded to me the solution: "[4,500,000*1.03- (135,000/10 *7)] * 2/9 Where did you get the fraction 2/9 from? Denise 90. On January 1, 2004, Hernandez Corporation issued $4,500,000 of 10% ten-year bonds at 103. The bonds are callable at the option of Hernandez at 105. Hernandez has recorded amortization of the bond premium on the straight-line method (which was not materially different from the effective-interest method). On December 31, 2010, when the fair market value of the bonds was 96, Hernandez repurchased $1,000,000 of the bonds in the open market at 96. Hernandez has recorded interest and amortization for 2010. Ignoring income taxes and assuming that the gain is material, Hernandez should report this reacquisition as a. a loss of $49,000. b. a gain of $49,000. c. a loss of $61,000. d. a gain of $61,000. This answer is B Solution: Current value of Retirement bond Current value of Retirement bond $1,009,000 Retirement bond $960,000 Gain on retirement of these bonds $49,000,Michael. In the answer you forwarded to me the solution: "[4,500,000*1.03- (135,000/10 *7)] * 2/9 Where did you get the fraction 2/9 from? Denise 90. On January 1, 2004, Hernandez Corporation issued $4,500,000 of 10% ten-year bonds at 103. The bonds are callable at the option of Hernandez at 105. Hernandez has recorded amortization of the bond premium on the straight-line method (which was not materially different from the effective-interest method). On December 31, 2010, when the fair market value of the bonds was 96, Hernandez repurchased $1,000,000 of the bonds in the open market at 96. Hernandez has recorded interest and amortization for 2010. Ignoring income taxes and assuming that the gain is material, Hernandez should report this reacquisition as a. a loss of $49,000. b. a gain of $49,000. c. a loss of $61,000. d. a gain of $61,000. This answer is B Solution: Current value of Retirement bond Current value of Retirement bond $1,009,000 Retirement bond $960,000 Gain on retirement of these bonds $49,000,Michael, In this question, how do you know the effective interest rate goes from 6 percent to five percent in the (570000*.06) -(600000*.05) Why doesn't the interest rate stay constant? Denise 91. The 10% bonds payable of Nixon Company had a net carrying amount of $570,000 on December 31, 2010. The bonds, which had a face value of $600,000, were issued at a discount to yield 12%. The amortization of the bond discount was recorded under the effective-interest method. Interest was paid on January 1 and July 1 of each year. On July 2, 2011, several years before their maturity, Nixon retired the bonds at 102. The interest payment on July 1, 2011 was made as scheduled. What is the loss that Nixon should record on the early retirement of the bonds on July 2, 2011? Ignore taxes. a. $12,000. b. $37,800. c. $33,600. d. $42,000. Solution: Current value of bond 570,000+(570,000*0.06)-(600.000*0.05) Current value of bond $574,200 b. $37,800. $612,000 loss on retirement of these bonds $(37,800)

 

Paper#8164 | Written in 18-Jul-2015

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