Class5-solution

Class5-solution - EXERCISE 14-12 Reacquisition price...

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EXERCISE 14-12 Reacquisition price ($900,000 x 101%) $909,000 Less: Net carrying amount of bonds redeemed: Par value $900,000 Unamortized discount (13,500) Unamortized bond issue costs (7,200 ) 879,300 Loss on redemption $ 29,700 Calculation of unamortized discount— Original amount of discount: $900,000 x 3% = $27,000 $27,000/10 = $2,700 amortization per year Amount of discount unamortized: $2,700 x 5 = $13,500 Calculation of unamortized issue costs— Original amount of costs: $24,000 x $900,000/$1,500,000 = $14,400 $14,400/10 = $1,440 amortization per year Amount of costs unamortized: $1,440 x 5 = $7,200 January 2, 2007 Bonds Payable. ..................................................... 900,000 Loss on Redemption of Bonds. .......................... 29,700 Unamortized Bond Issue Costs. ................ 7,200 Discount on Bonds Payable. ..................... 13,500 Cash. ............................................................. 909,000 1
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CA 14-3 (a) 1. The selling price of the bonds would be the present value of all of the expected net future cash outflows discounted at the effective annual interest rate (yield) of 11%. The present value is the sum of the present value of its maturity amount (face value) plus the present value of the series of future semiannual interest payments. 2. Immediately after the bond issue is sold, the current asset, cash, would be increased by the proceeds from the sale of the bond issue. A noncurrent liability, bonds payable, would be presented in the balance sheet at the face value of the bonds less the discount. The bond issue costs would be classified as a
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This note was uploaded on 12/04/2009 for the course MGMT 351 taught by Professor Staff during the Spring '08 term at Purdue.

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Class5-solution - EXERCISE 14-12 Reacquisition price...

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