Chapter 1 Problem 12-22 to 25
Problem 12-22
Question 1 – Answer A
Acquisition cost (4,400,000 – 100,000) 4,300,000
Amortization of premium from Oct. 1, 2007 to Dec. 31, 2008 (4,000 x 15) ( 60,000)
Book value – December 31, 2008 4,240,000
Monthly amortization (300,000/75 months) 4,000
Question 2 – Answer B
Interest for 2008 (4,000,000 x 10%) 400,000
Amortization of premium (4,000 x 12 months) ( 48,000)
Interest income 352,000
Problem 12-23 Answer B
Interest for 2008 (2,000,000 x 12%) 240,000
Amortization of discount (100,000/5) 20,000
Interest income 260,000
Problem 12-24 Answer B
Premium on sale of bonds 140,000
Unamortized discount (100,000 – 20,000) 80,000
Gain on sale of bonds 220,000
Problem 12-25 Answer A
Acquisition cost – 1/1/2008 3,767,000
Discount amortization for 2008:
Interest income (14% x 3,767,000) 527,380
Interest received (12% x 4,000,000) 480,000 47,380
Book value – 12/31/2008 3,814,380
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