On December 31, 2021, Danny purchased $23,000 of newly issued bonds of Howard Corporation for $19,045. The bonds are dated December 31, 2021. The bonds are 9%, 10-year bonds paying interest semiannually on June 30 and December 31. The bonds are priced to yield 12% compounded semiannually. Read the requirement. Requirement a. What is the amount of the original issue discount? Start by completing the bond amortization table for the first year. (Round all amounts to the nearest dollar.) Year Interest Received December 31, 2021 June 30, 2022 December 31, 2022 Amortization of Original Issue Discount Taxpayers Basis Interest Income for the Bond The amount of the original issue discount is Requirement b. For the first semiannual period, what is the amount of the original issue discount Danny must recognize as ordinary income? (Round the amount to the nearest dollar.) The amount of the original issue discount Danny must recognize as ordinary income for the first semiannual period is Requirement c. What is the total amount of interest income Danny must recognize in 2022? (Round the amount to the nearest dollar.) The total amount of interest Danny must recognize in 2022 is Requirement d. What is Danny's basis for the bonds as of December 31, 2022? (Round the amount to the nearest dollar.) חו S s3 55 $11 50
On December 31, 2021, Danny purchased $23,000 of newly issued bonds of Howard Corporation for $19,045. The bonds are dated December 31, 2021. The bonds are 9%, 10-year bonds paying interest semiannually on June 30 and December 31. The bonds are priced to yield 12% compounded semiannually. Read the requirement. Requirement a. What is the amount of the original issue discount? Start by completing the bond amortization table for the first year. (Round all amounts to the nearest dollar.) Year Interest Received December 31, 2021 June 30, 2022 December 31, 2022 Amortization of Original Issue Discount Taxpayers Basis Interest Income for the Bond The amount of the original issue discount is Requirement b. For the first semiannual period, what is the amount of the original issue discount Danny must recognize as ordinary income? (Round the amount to the nearest dollar.) The amount of the original issue discount Danny must recognize as ordinary income for the first semiannual period is Requirement c. What is the total amount of interest income Danny must recognize in 2022? (Round the amount to the nearest dollar.) The total amount of interest Danny must recognize in 2022 is Requirement d. What is Danny's basis for the bonds as of December 31, 2022? (Round the amount to the nearest dollar.) חו S s3 55 $11 50
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:On December 31, 2021, Danny purchased $23,000 of newly issued bonds of Howard Corporation for $19,045. The bonds are dated
December 31, 2021. The bonds are 9%, 10-year bonds paying interest semiannually on June 30 and December 31. The bonds are
priced to yield 12% compounded semiannually.
Read the requirement.
Requirement a. What is the amount of the original issue discount?
Start by completing the bond amortization table for the first year. (Round all amounts to the nearest dollar.)
Year
Interest Received
December 31, 2021
June 30, 2022
December 31, 2022
Amortization of Original
Issue Discount
Taxpayers Basis
Interest Income for the Bond
The amount of the original issue discount is
Requirement b. For the first semiannual period, what is the amount of the original issue discount Danny must recognize as
ordinary income? (Round the amount to the nearest dollar.)
The amount of the original issue discount Danny must recognize as ordinary income for the first semiannual period is
Requirement c. What is the total amount of interest income Danny must recognize in 2022? (Round the amount to the nearest dollar.)
The total amount of interest Danny must recognize in 2022 is
Requirement d. What is Danny's basis for the bonds as of December 31, 2022? (Round the amount to the nearest dollar.)
חו
S
s3
55
$11
50
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