Thursday, May 12, 2011

Financial Accounting Volume 2 2008 Valix-Peralta
Chapter 2 Problem 2-6

Requirement 1

            2008
Jan. 1. Cash 4,200,000
Bonds payable 4,000,000
Premium on bonds payable 200,000

Dec 31 Interest expense 480,000
Cash (4,000,000 x 12%) 480,000

31 Premium on bonds payable 40,000
Interest Expense (200,000 / 5) 40,000

31 Bonds payable 1,000,000
Premium on bonds payable 40,000
Cash 950,000
Gain on early retirement of bonds 90,000

Face of bonds payable retired 1,000,000
Add: Applicable Premium(1/4x1160,000) 40,000
Book value 1,040,000
Less: Retirement price 950,000
Gain on retirement 90,000

  2009
Dec. 31 Interest expense     360,000
                                 Cash (3,000,000 x 12%)    360,00

                 31   Premium on bonds payable      30,000
                                Interest expense (40,000 x 3/4)        30,000

Requirement 2

Noncurrent liabilities
            Bonds payable        3,000,000
            Premium on bonds payable              90,000
            Book value                                 3,090,000

Finding something? Use this search bar!