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Chapter_14_Class_Practice_Problems_Solutions_All - Chapter...

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Chapter 14 Class Practice Problems 1. Grider Industries, Inc. issued $6,000,000 of 8% debentures on May 1, 2010 and received cash totaling $5,323,577. The bonds pay interest semiannually on May 1 and November 1. The maturity date on these bonds is November 1, 2018. The firm uses the effective-interest method of amortizing discounts and premiums. The bonds were sold to yield an effective- interest rate of 10%. Instructions Calculate the total dollar amount of discount or premium amortization during the first year (5/1/10 through 4/30/11) these bonds were outstanding. (Show computations and round to the nearest dollar.) Solution Interest Cash Discount Carrying Date Expense Interest Amortized Value of Bonds 5/1/10 $5,323,577 11/1/10 $266,179 $240,000$26,179 5,349,756 5/1/11 267,488 240,000 27,488 5,377,244 Total$53,667
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2. Prepare journal entries to record the following retirement. (Show computations and round to the nearest dollar.) The December 31, 2010 balance sheet of Wolfe Co. included the following items: 7.5% bonds payable due December 31, 2018 $1,200,000 Unamortized discount on bonds payable 48,000 The bonds were issued on December 31, 2008 at 95, with interest payable on June 30 and December 31. (Use straight-line amortization.) On April 1, 2011, Wolfe retired $240,000 of these bonds at 101 plus accrued interest.
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Chapter_14_Class_Practice_Problems_Solutions_All - Chapter...

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