The following are selected account balances for ABC Co. at 31 December 2016: Statement of Financial Position Non-Current Liabilities Bonds payable $1,126,593 Notes Payable $1,265,647 Cash Flow Statement Cash Flow from Financing Activities Note Payable Installment $500,000 Cash paid for interest $100,000 Income Statement Interest Expense $236,477.1 Further Information: • The Bonds payable were issued on 01 January 2016 for $1,135,903. They are 10- year bonds with interest paid semiannually on June 30 and December 30. • ABC Co. uses the effective-interest method of amortization. • The notes payable are 5-year, zero-interest bearing notes that are issued on 01 January 2015 and payable in equal installments of $500,000 on December 31. Required: For ABC Co.: a. Calculate the issue price of the notes payable. b. Assume that ABC Co. extinguished 70% of bonds on January 1, 2017, by exchanging a building with a fair value of $800,000. The building had an original cost of $1,200,000 and a book value of $700,000 as of January 1, 2017. Prepare NOT the journal entry on January 1, 2017. 2OST OR SHARE

The following are selected account balances for ABC Co. at 31 December 2016: Statement of Financial Position Non-Current Liabilities Bonds payable $1,126,593 Notes Payable $1,265,647 Cash Flow Statement Cash Flow from Financing Activities Note Payable Installment $500,000 Cash paid for interest $100,000 Income Statement Interest Expense $236,477.1 Further Information: • The Bonds payable were issued on 01 January 2016 for $1,135,903. They are 10- year bonds with interest paid semiannually on June 30 and December 30. • ABC Co. uses the effective-interest method of amortization. • The notes payable are 5-year, zero-interest bearing notes that are issued on 01 January 2015 and payable in equal installments of $500,000 on December 31. Required: For ABC Co.: a. Calculate the issue price of the notes payable. b. Assume that ABC Co. extinguished 70% of bonds on January 1, 2017, by exchanging a building with a fair value of $800,000. The building had an original cost of $1,200,000 and a book value of $700,000 as of January 1, 2017. Prepare NOT the journal entry on January 1, 2017. 2OST OR SHARE

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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