Blossom Company purchased $1180000 of8%, 5-year bonds from Carlin, Inc. on January1, 2021, with interest payable on July 1 andJanuary 1. The bonds sold for $1230096 at aneffective interest rate of 7%. Using theeffective interest method, Blossom Companydecreased the Available-for-Sale DebtSecurities account for the Carlin, Inc. bondson July 1, 2021 and December 31, 2021 by theamortízed premiums of $4048 and $4192,respectively. At February 1, 2022, BlossomCompany sold the Carlin bonds for $1215800.After accruing for interest, the carrying valueof the Carlin bonds on February 1, 2022 was$1220500. Assuming Blossom Company has aportfolio of available-for-sale debtinvestments, what should Blossom Companyreport as a gain (or loss) on the bonds?$-4700.$0.$-9596.$-14296.

Bonds refers to the units of corporate debts which are issued by companies and also securitized…

Blossom Company purchased $1180000 of 8%, 5-year bonds from Carlin, Inc. on January 1, 2021, with interest payable on July 1 and January 1. The bonds sold for $1230096 at an effective interest rate of 7%. Using the effective interest method, Blossom Company decreased the Available-for-Sale Debt Securities account for the Carlin, Inc. bonds on July 1, 2021 and December 31, 2021 by the amortized premiums of $4048 and $4192,

Blossom Company purchased $1180000 of 8%, 5-year bonds from Carlin, Inc. on January 1, 2021, with interest payable on July 1 and January 1. The bonds sold for $1230096 at an effective interest rate of 7%. Using the effective interest method, Blossom Company decreased the Available-for-Sale Debt Securities account for the Carlin, Inc. bonds on July 1, 2021 and December 31, 2021 by the amortized premiums of $4048 and $4192,

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 6RE: Refer to the information in RE13-5. Assume that on June 30, Aggie received interest on the Smith...

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Aggies Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018, and received $540,000. Interest is payable semi-annually. The premium is amortized using the straight-line method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. Dec. 31, 2018: entry to record payment of interest to bondholders C. Dec. 31, 2018: entry to record amortization of premium
Volunteer Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 and received $540,000. Interest is payable annually. The premium is amortized using the straightline method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. June 30, 2019: entry to record payment of interest to bondholders C. June 30, 2019: entry to record amortization of premium D. June 30, 2020: entry to record payment of interest to bondholders E. June 30, 2020: entry to record amortization of premium
Refer to the information in RE13-5. Assume that on December 31, 2019, the investment in Smith Corporation bonds has a market value of 12,500. Prepare the year-end journal entry to record the unrealized gain or loss.
Refer to the information in RE13-5. Assume that on June 30, Aggie received interest on the Smith Corporation bonds. Prepare the June 30 journal entries to record the receipt of the interest. On April 30, 2019, Aggie Corporation purchased Smith Corporation 10%, 5-years bonds with a face value of 12,000 at par plus four months of accrued interest. Prepare the April 30 journal entry to record the purchase of these available-for-sale securities.
Edward Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 and received $480,000. Interest is payable semiannually. The discount is amortized using the straight-line method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. Dec. 31, 2018: entry to record payment of interest to bondholders C. Dec. 31, 2018: entry to record amortization of discount
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On January 1, 2019, Brewster Company issued 2,000 of its 5-year, 1,000 face value, 11% bonds dated January 1 at an effective annual interest rate (yield) of 9%. Brewster uses the effective interest method of amortization. On December 31, 2023, Brewster extinguished the 2,000 bonds early through acquisition in the open market for 1,980,000. On July 1, 2022, Brewster issued 5,000 of its 6-year, 1,000 face value, 10% convertible bonds dated July 1 at an effective annual interest rate (yield) of 12%. The bonds are convertible at the option of the investor into Brewsters common stock at a ratio of 10 shares of common stock for each bond. Brewster uses the effective interest method of amortization. On July 1, 2023, an investor in Brewsters convertible bonds tendered 1,500 bonds for conversion into 15,000 shares of Brewsters common stock, which had a market value of 105 per share at the date of the conversion. Required: 1. Using the information about Brewster, answer the following questions: a. Were the 11% bonds issued at par, at a discount, or at a premium? Why? b. Is the amount of interest expense for the 11% bonds using the effective interest method of amortization higher in the first or second year of the life of the bond issue? Why? 2. Using the information about Brewster, explain the following: a. How is a gain or loss on early extinguishment of debt determined? Does the early extinguishment of the 11% bonds result in a gain or loss? Why? b. How does Brewster report the early extinguishment of the 11% bonds on the 2023 income statement? 3. Based on the information provided about Brewster, answer the following questions: a. Does recording the conversion of the 10% convertible bonds into common stock under the book value method affect net income? What is the rationale for the book value method? b. Does recording the conversion of the 10% convertible bonds into common stock under the market value method affect net income? What is the rationale for the market value method?
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