Dunbar (issuer): Effective Nominal Discount Date Interest (9%) Interest (8%) Amortization Balance $48,055 48,380 48,734 49,120 49,541 1/1/14 1/1/15 1/1/16 1/1/17 1/1/18 1/1/19 $4,000 4,000 4,000 $4,325 $325 4,354 354 4,386 4,421 4,459 386 4,000 4,000 421 459 50,000 Garfield (purchaser): Effective Nominal Discount Date Interest (10%) Interest (8%) Amortization Balance 1/2/16 1/1/17 1/1/18 1/1/19 $47,513 48,264 $4,751 $4,000 $751 4,826 4,000 4,000 826 49,090 4,909 909 50,000* *Adjusted for rounding.
Dunbar (issuer): Effective Nominal Discount Date Interest (9%) Interest (8%) Amortization Balance $48,055 48,380 48,734 49,120 49,541 1/1/14 1/1/15 1/1/16 1/1/17 1/1/18 1/1/19 $4,000 4,000 4,000 $4,325 $325 4,354 354 4,386 4,421 4,459 386 4,000 4,000 421 459 50,000 Garfield (purchaser): Effective Nominal Discount Date Interest (10%) Interest (8%) Amortization Balance 1/2/16 1/1/17 1/1/18 1/1/19 $47,513 48,264 $4,751 $4,000 $751 4,826 4,000 4,000 826 49,090 4,909 909 50,000* *Adjusted for rounding.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
On January 1, 2014, Dunbar Corporation, an 85%-owned subsidiary of Garfield Industries, received $48,055 for $50,000 of 8%, 5-year bonds it issued when the market rate was 9%. When Garfield Industries purchased these bonds for $47,513 on January 2, 2016, the market rate was 10%. Given the following effective interest amortization schedules for both companies, calculate the gain or loss on retirement and the interest adjustments to the issuer’s income distribution schedules over the remaining term of the bonds.
Transcribed Image Text:Dunbar (issuer):
Effective
Nominal
Discount
Date
Interest (9%)
Interest (8%)
Amortization
Balance
$48,055
48,380
48,734
49,120
49,541
1/1/14
1/1/15
1/1/16
1/1/17
1/1/18
1/1/19
$4,000
4,000
4,000
$4,325
$325
4,354
354
4,386
4,421
4,459
386
4,000
4,000
421
459
50,000
Garfield (purchaser):
Effective
Nominal
Discount
Date
Interest (10%)
Interest (8%)
Amortization
Balance
1/2/16
1/1/17
1/1/18
1/1/19
$47,513
48,264
$4,751
$4,000
$751
4,826
4,000
4,000
826
49,090
4,909
909
50,000*
*Adjusted for rounding.
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