Intermediate Accounting, 10 Ed
10th Edition
ISBN: 9781260310177
Author: Mark W. Nelson, Wayne B. Thomas J. David Spiceland
Publisher: McGraw-Hill Education
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Chapter 14, Problem 14.12BE
To determine
Early Extinguishment debt
When the debt obligations are retired before its scheduled maturity date, the transactions are referred to as early extinguishment of debt. The debt is paid at the market price of the debt and for any difference between the book value of the debt with its market price, the business recognizes the gain or loss on early extinguishment of the debt.
Effective interest rate of amortization bond
Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but a constant percentage rate.
To Prepare: The
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Exercise 10.9 (Algo) Accounting for Bonds Issued at a Premium: Issuance, Interest Payments, and
Retirement (LO10-5, LO10-6)
Xonic Corporation issued $8.5 million of 20-year, 8 percent bonds on April 1, 2021, at 102. Interest is paid on March 31 and September
30 of each year, and all of the bonds in the issue mature on March 31, 2041 Xonic's fiscal year ends on December 31. Prepare the
following journal entries.
a. April 1, 2021, to record the issuance of the bonds.
b. September 30, 2021, to pay interest and to amortize the bond premium.
c. March 31, 2041, to pay interest, amortize the bond premium, and retire the bonds at maturity (make two separate entries). Assume
an adjusting entry was made on December 31, 2040, to recognize interest from October 1 to December 31.
d. What is the effect of amortizing the bond premium on (1) annual net income and (2) annual net cash flow from operating activities.
(ignore possible income tax effects.)
(If no entry is required for a transaction/event,…
Exercise 14-23 (Algo) Early extinguishment [LO14-5]
The balance sheet of River Electronics Corporation as of December 31, 2023, included 12.50% bonds having a face amount of $91.8 million. The bonds had been issued in 2016 and had a remaining discount of $4.8 million at December 31, 2023. On January 1, 2024, River Electronics called the bonds before their scheduled maturity at the call price of 105.
Required:
Prepare the journal entry by River Electronics to record the redemption of the bonds at January 1, 2024.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.
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Current Attempt in Progress
A $650000 bond was retired at 102 when the carrying value of the bond was $677000. The entry to record the retirement would
include a
O loss on bond redemption of $14000.
O loss on bond redemption of $13000.
O gain on bond redemption of $13000.
O gain on bond redemption of $14000.
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Chapter 14 Solutions
Intermediate Accounting, 10 Ed
Ch. 14 - How is periodic interest determined for...Ch. 14 - As a general rule, how should long-term...Ch. 14 - How are bonds and notes the same? How do they...Ch. 14 - What information is contained in a bond indenture?...Ch. 14 - How is the price determined for a bond (or bond...Ch. 14 - A zero-coupon bond pays no interest. Explain.Ch. 14 - Prob. 14.8QCh. 14 - Compare the two commonly used methods of...Ch. 14 - Prob. 14.10QCh. 14 - When a notes stated rate of interest is...
Ch. 14 - How does an installment note differ from a note...Ch. 14 - Prob. 14.13QCh. 14 - Prob. 14.14QCh. 14 - Air Supply issued 6 million of 9%, 10-year...Ch. 14 - Both convertible bonds and bonds issued with...Ch. 14 - Prob. 14.17QCh. 14 - Cordova Tools has bonds outstanding during a year...Ch. 14 - If a company prepares its financial statements...Ch. 14 - (Based on Appendix 14A) Why will bonds always sell...Ch. 14 - Prob. 14.21QCh. 14 - Prob. 14.22QCh. 14 - Prob. 14.23QCh. 14 - Bank loan; accrued interest LO132 On October 1,...Ch. 14 - Non-interest-bearing note; accrued interest LO132...Ch. 14 - Determining the price of bonds LO142 A company...Ch. 14 - Determining the price of bonds LO142 A company...Ch. 14 - Effective interest on bonds LO142 On January 1, a...Ch. 14 - Effective interest on bonds LO142 On January 1, a...Ch. 14 - Straight-line interest on bonds LO142 On January...Ch. 14 - Investment in bonds LO142 On January 1, a company...Ch. 14 - Note with unrealistic interest rate LO143 On...Ch. 14 - Installment note LO143 On January 1, a company...Ch. 14 - Prob. 14.12BECh. 14 - Bonds with detachable warrants LO145 Hoffman...Ch. 14 - Convertible bonds LO145 Hoffman Corporation...Ch. 14 - Prob. 14.22ECh. 14 - Prob. 14.36ECh. 14 - Prob. 14.14PCh. 14 - Prob. 14.17PCh. 14 - Prob. 14.21PCh. 14 - Prob. 14.3DMP
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