Account for bonds payable retired prior to maturity) On January 1, 2017, Ditchey Corporation issued five-year, 6% bonds payable with a face value of $3,500,000. The bonds were issued at 96 and pay interest on January 1 and July 1. Ditchey amortizes bond discounts using the straight-line method. On December 31, 2019, Ditchey retired the bonds early by purchasing them at a market price of 99. The company’s fiscal year ends on December 31. 1. Calculate the carrying value of the bonds payable on December 31, 2019, prior to their retirement. 2. Calculate the gain or loss on the retirement of the bonds payable on December 31, 2019. Indicate where this gain or loss will appear in the financial statements.
Account for bonds payable retired prior to maturity) On January 1, 2017, Ditchey Corporation issued five-year, 6% bonds payable with a face value of $3,500,000. The bonds were issued at 96 and pay interest on January 1 and July 1. Ditchey amortizes bond discounts using the straight-line method. On December 31, 2019, Ditchey retired the bonds early by purchasing them at a market price of 99. The company’s fiscal year ends on December 31. 1. Calculate the carrying value of the bonds payable on December 31, 2019, prior to their retirement. 2. Calculate the gain or loss on the retirement of the bonds payable on December 31, 2019. Indicate where this gain or loss will appear in the financial statements.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Account for bonds payable retired prior to maturity) On
January 1, 2017, Ditchey Corporation issued five-year, 6% bonds payable with a face value
of $3,500,000. The bonds were issued at 96 and pay interest on January 1 and July 1. Ditchey
amortizes bond discounts using the straight-line method. On December 31, 2019, Ditchey
retired the bonds early by purchasing them at a market price of 99. The company’s fiscal year
ends on December 31.
1. Calculate the carrying
retirement.
2. Calculate the gain or loss on the retirement of the bonds payable on December 31, 2019.
Indicate where this gain or loss will appear in the financial statements.
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