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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education