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
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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:
NOT
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
the journal entry on January 1, 2017.
ROST OR SHARE
Transcribed Image Text: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: NOT 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 the journal entry on January 1, 2017. ROST OR SHARE
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