In year B, Pellinore Co. buys some of the outstanding bonds of its subsidiary Sagramore Co. The resulting 'gain on constructive bond retirement and extinguishment' is 50. During year B, the interest elimination amount is 5. Also during year B, S has new unconfirmed interfirm losses of 30 and confirmations of previous interfirm losses of 20. S also has an interfirm gain of 25 in year B, but this amount is confirmed. P reports new unconfirmed interfirm losses of 40 and new unconfirmed interfirm gains of 15. S reports Net Income in year B of 650 and declares dividends on their common shares of 10. P owns 80% of S's common shares and reports Net Income and dividends of 1000 and 200, respectively. Total Consolidated Net Income is O a. 1000 b. 1225 O c. 1069 O d. 520

In year B, Pellinore Co. buys some of the outstanding bonds of its subsidiary Sagramore Co. The resulting 'gain on constructive bond retirement and extinguishment' is 50. During year B, the interest elimination amount is 5. Also during year B, S has new unconfirmed interfirm losses of 30 and confirmations of previous interfirm losses of 20. S also has an interfirm gain of 25 in year B, but this amount is confirmed. P reports new unconfirmed interfirm losses of 40 and new unconfirmed interfirm gains of 15. S reports Net Income in year B of 650 and declares dividends on their common shares of 10. P owns 80% of S's common shares and reports Net Income and dividends of 1000 and 200, respectively. Total Consolidated Net Income is O a. 1000 b. 1225 O c. 1069 O d. 520

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

8 Company A invests in a $55 million bond. It was purchased at par and is accounted for using amortized cost. At year-end Company A believes that there is a 5% the company will not collect 50% of the face value over its life. Company A uses the expected loss impairment model. Discuss any financial reporting issues (should we recognize them or not recognize them) and provide any recommendations on how to handle this situation.
On January 1 of this year, Diego Corporation sold bonds with a face value of $530,000 and a coupon rate of 5 percent. The bonds mature in 10 years and pay interest annually on December 31. Diego uses the effective-interest amortization method. Ignore any tax effects. Each case is independent of the other cases. (FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. Required:1. Complete the following table. The interest rates provided are the annual market rate of interest on the date the bonds were issued. Case A (5 percent) Case B (7 percent) Case C (4 percent) a. Cash received at issuance b. Interest expense recorded in Year 1 c. Cash paid for interest in Year 1 d. Cash paid at maturity for bond principal
On June 30, 2002, Free Company had outstanding 8%, P1,000,000 face amount, 15-year bonds maturing on June 30 , 2009. Interest is payable on June 30 and December 31. The unamortized balance on June 30, 2002, in the bond discount and bond issue costs accounts were P35,000 and P10,000 respectively. Free acquired all of these bonds at 94 on June 30, 2002, and retired them. Ignoring income taxes, how much gain should Free report on this early extinguishment of debt? P15,000 P25,000 P35,000 P60,000
The Acme Insurance Company purchased a 5-year bond whose interestrate floats with LIBOR. Specifically, the interest rate in a given year isequal to LIBOR plus 200 basis points. At the same time the insurancecompany purchases this bond, it enters into a floor agreement with theBear Stearns in which the notional amount is Ҏ35 million with a strikeprice of 6%. The premium Acme Insurance Company agrees to pay BearStearns each year is Ҏ300,000. a) Suppose at the time that it is necessary to determinewhether a payment must be made by Bear Stearns, LIBORis 9%. How much must Bear Stearns pay to Acme InsuranceCompany?b) Suppose at the time that it is necessary to determinewhether a payment must be made by Bear Stearns, LIBORis 3%. How much Bear Stearns pay to Acme InsuranceCompany?
Peter Company purchased bonds at a discount of P5,000,000. Subsequently, Peter sold these bonds at a premium of P2,000,000. During the period that Peter held this investment, amortization of the discount amounted to P1,500,000. What amount should Peter report as gain on the sale of the bonds?
On January 1 of this year, Barnett Corporation sold bonds with a face value of $507,500 and a coupon rate of 7 percent. The bonds mature in 20 years and pay interest annually on December 31. Barnett uses the effective-interest amortization method. Ignore any tax effects. Each case is independent of the other cases. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final answers to nearest whole dollar amount.) Required: 1. Complete the following table. The interest rates provided are the annual market rate of interest on the date the bonds were issued. Case A (7%) Case B (8%) Case C (6%) a. Cash received at issuance $ 507,500 b. Interest expense recorded in Year 1 $ 35,525 c. Cash paid for interest in Year 1 $ 35,525 d. Cash paid at maturity for bond principal $ 507,500
The 12% bonds payable of Lynn Co. had a carrying amount of $936,000 on December 31, 2004. The bonds, which had a face value of $900,000, were issued at a premium to yield 10%. Lynn uses the effective interest method of amortization. Interest is paid on June 30 and December 31. On June 30, 2005, several years before their maturity, Lynn retired the bonds at 104 plus accrued interest. The loss on retirement, ignoring taxes, is a.$0. b.$7,200. c.$11,160. d.$36,000.
A company buys debt securities for $2,000 on December 31, year 1. The debt securities are classified as available-for-sale. The company does not elect to use the fair value option for reporting its available-for-sale debt securities. The fair value of the securities increases to $7,000 on December 31, year 2, and to $9,500 on December 31, year 3. On December 31, year 3, the company sells the securities at fair value. Assume the company has a tax rate of 30%. What is the amount of the reclassification adjustment to other comprehensive income on December 31, year 3? A. $5,250 debit B. $ 7,500 debit C. $5,250 credit D. $ 7,500 credit
Darouich Industries decided to retire an $1,000,000 bond issue before its due date. The bonds were callable by the company at 104. At the same time, the bonds were selling at 103 on the open market. The company was able to buy $500,000 of the bonds at 103 and called the remaining bonds. At that time, there was $125,000 in the Discount on Bonds Payable account. Compute the gain or loss on the retirement of the called bonds. Group of answer choices $82,500 gain $77,500 loss $82,500 loss $77,500 gain
Please do not give solution in image format ? Thanks you.
CD Company issued its 9%, 25-year mortgage bonds in the principal amount of Tk. 3,00,00,000 on January 2, 2001, at a discount of Tk. 27,22, 992 (effective rate of 10%). The indenture securing the issue provided that the bonds could be called for redemption in total but not in part at any time before maturity at 104% of the principal amount, but it did not provide for any sinking fund. On December 18, 2015, the company issued its 11%,20-year debenture bonds in the principal amount of Tk. 4,00,00,000 at 102, and the proceeds were used to redeem the 9%, 25-year mortgagebonds on January 2, 2016. The indenture securing the new issue did not provide for any sinking fund or for retirement before maturity. The unamortized discount at retirement was Tk. 18,42,888.Required:(a) Prepare journal entries to record the issuance of the 11% bonds and the retirement of the 9% bonds.(b) Indicate the income statement treatment of the gain or loss from retirement and the note disclosure required.
On February 1, 20X1, Davis Corporation issued 12%, $1,000,000 par, 10-year bonds for $1,117,000. Davis reacquired all of these bonds at 102% of par, plus accrued interest, on May 1, 20X3, and retired them. The unamortized bond premium on that date was $78,000. Required: Before income taxes, what was Davis’s gain or loss on the bond extinguishment?