Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
5th Edition
ISBN: 9780134078939
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Question
Chapter 12, Problem 12.10SE
1.
To determine
Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.
Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.
To calculate: Carrying amount of bonds payable on the retirement date.
2.
To determine
To determine: The amount of cash to retire the bonds payable.
3.
To determine
To compute: Gain or loss on the retirement of the bonds payable.
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Nos. 10-16 pertains to the following:
Manabo Company issued ten thousand P1,000 bonds on
January 1, 2011. They have a ten-year term and pay interest
semiannually January 1 and July 1. This is the partial bond
amortization schedule for the bonds.
Effective Decrease in Outstanding
Interest
Payment
Cash
Balance
Balance
8,640,967
300,000
345,639
45,639
8,686,606
8,734,070
8,783,433
2
300,000
300,000
300,000
347,464
47,464
3
349,363
49,363
4
The Titan retires a $24.6 million bond issue when the carrying value of the bonds is $21.2 million, but the market value of the bonds is $27.8 million. The entry to record the retirement will include:
Multiple Choice
A debit of $6.6 million to a loss account.
No gain or loss on retirement.
A credit of $6.6 million to a gain account.
A credit to cash for $21.2 million.
John Deere retires a $40 million bond issue when the carrying value of the bonds is $42 million, but the market value of the bonds is $36 million. The entry to record the retirement will include:
A. A credit of $6 million to a gain account
B. A debit of $6 million to a loss account
C. A credit to cash for $42 million
D. No gain or loss on retirement
Chapter 12 Solutions
Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
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