&quot;1-22-2010

# &quot;1-22-2010 - EXERCISE 14-12 Reacquisition...

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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 ) 977,000 Loss on redemption \$ 33,000 Calculation of unamortized discount— Original amount of discount: \$1,000,000 x 3% = \$30,000 \$30,000/10 = \$3,000 amortization per year Amount of discount unamortized: \$3,000 x 5 = \$15,000 Calculation of unamortized issue costs— Original amount of costs: \$24,000 x \$1,000,000/\$1,500,000 = \$16,000 \$16,000/10 = \$1,600 amortization per year Amount of costs unamortized: \$1,600 x 5 = \$8,000 January 2, 2010 Bonds Payable. ....................................................................... 1,000,000 Loss on Redemption of Bonds. ............................................... 33,000 Unamortized Bond Issue Costs. ................................. 8,000 Discount on Bonds Payable. ...................................... 15,000 Cash. .......................................................................... 1,010,000 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
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## This note was uploaded on 04/09/2011 for the course MGMT 351 taught by Professor Staff during the Winter '08 term at Purdue.

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&quot;1-22-2010 - EXERCISE 14-12 Reacquisition...

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