Ch.14 review question

Ch.14 review question - the bonds using the straight-line...

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Chapter 14 Issuance and Early Extinguishment of Debt On September 15, 2012, the Corporation sold bonds with an aggregate principal amount of $500,000,000 bearing a 14% interest rate. The bonds will mature on September 15, 2020, and are unsecured subordinated obligations of the Corporation. Interest is payable semi-annually on March 15 and September 15. The Corporation may redeem the bonds at any time beginning September 14, 2010, as a whole or from time to time in part, through maturity, at specified redemption prices ranging from 112% of principal in declining percentages of principal amount through 2017 when the percentage is set at 100% of principal amount. The cost of issuing the bonds, totaling $11,000,000, and the discount of $5,000,000 are being amortized over the life of
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Unformatted text preview: the bonds, using the straight-line method and the interest method, respectively. Amortization of the items for the year ended December 31, 2011, was $960,000 and $252,000, respectively. During the year ended December 31, 2011, the Corporation repurchased, in open market transactions, $200,000,000 in face amount of the bonds for $219,333,000. The unamortized cost of issuing these bonds and the unamortized discount, $3,972,000 and $1,892,000, respectively, have been deducted in the current period. 1. Prepare the journal entry for the issuance of these bonds on September 15, 2010. 2. Prepare the journal entry for the repurchase of these bonds, assuming the date of repurchase was September 15, 2011. The cash paid to repurchase the bonds was $219,333,000....
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