1-25-11 Solutions

1-25-11 Solutions - Q14-16. When a debt instrument is...

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Q14-16. When a debt instrument is exchanged in a bargained transaction entered into at arm’s- length, the stated interest rate is presumed to be fair unless: (1) no interest rate is stated, or (2) the stated interest rate is unreasonable, or (3) the stated face amount of the debt instrument is materially different from the current sales price for the same or similar items or from the current market value of the debt instrument.
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BRIEF EXERCISE 14-13 (a) Cash. ...................................................................... ................................................................................ 47,664 Discount on Notes Payable. ................................ 27,336 Notes Payable. ............................................ 75,000 (b) Interest Expense. .................................................. 5,720 Discount on Notes Payable ($47,664 X 12%). ....................................... 5,720
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BRIEF EXERCISE 14-14 (a) Computer. .............................................................. 31,495 Discount on Notes Payable. ................................ 8,505 Notes Payable. ............................................ 40,000 (b) Interest Expense. .................................................. 3,779 Cash. ............................................................ 2,000 Discount on Notes Payable. ...................... 1,779 ($31,495 X 12% = $3,779) ($40,000 X 5% = $2,000)
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EXERCISE 14-12 Reacquisition price ($1,000,000 X 101%). ............... $1,010,000 Less: Net carrying amount of bonds redeemed: Par value. ........................................................ $1,000,000 Unamortized discount. .................................. (15,000) Unamortized bond issue costs. ................... (8,000
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1-25-11 Solutions - Q14-16. When a debt instrument is...

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