On January 1, 2015, Marigold Corp. issued $17100000 of 10% ten-year bonds at 102. The bonds are callable at the option of Marigold at 104. Marigold has recorded amortization of the bond premium on the straight-line method (which was not materially different from the effective-interest method). On December 31, 2021, when the fair value of the bonds was 97, Marigold repurchased $3800000 of the bonds in the open market at 97. Marigold has recorded interest and amortization for 2021. Ignoring income taxes and assuming that the gain is material, Marigold should report this reacquisition as a loss of $136800. again of $136800. a loss of $184800. again of $184800.

On January 1, 2015, Marigold Corp. issued $17100000 of 10% ten-year bonds at 102. The bonds are callable at the option of Marigold at 104. Marigold has recorded amortization of the bond premium on the straight-line method (which was not materially different from the effective-interest method). On December 31, 2021, when the fair value of the bonds was 97, Marigold repurchased $3800000 of the bonds in the open market at 97. Marigold has recorded interest and amortization for 2021. Ignoring income taxes and assuming that the gain is material, Marigold should report this reacquisition as a loss of $136800. again of $136800. a loss of $184800. again of $184800.

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

On December 31, 2015, Martin Corp invested in Marlin’s 5-year, $200,000 bond with a 5% interest rate for $191,575. The bond pays semiannual interest on June 30th and December 31st. The fair values of the bonds at the end of 2016~2018 are $194,500, $194,200, and $195,750. Martin sold its investment in Marlin’s bond on July 1, 2019 at 98 ½ (i.e. selling price is = 98.5% of the face value).
On March 1, 2021, Navy Corporation used excess cash to purchase U.S. Treasury bonds for $103,000 plus accrued interest. The bonds were purchased at face value. The appropriate interest rate is 6%. Interest on these bonds is payable on January 1 and July 1 of each year. Navy's investment is accounted for as held-to-maturity. The fair value of the Treasury bonds is $104,000 at year-end.Required:Prepare the appropriate journal entries to record the transactions for the year, including any year-end adjustments. Record the purchase of U.S Treasury bonds for cash and accrued interest. Record the cash received for interest revenue and receivable. Record the entry for interest received.
On January 1, 2024, Rapid Airlines issued $205 million of its 6% bonds for $188 million. The bonds were priced to yield 8%. Interest is payable semiannually on June 30 and December 31. Rapid Airlines records interest at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2024, the fair value of the bonds was $194 million as determined by their market value in the over-the-counter market. Rapid determined that $1,000,000 of the increase in fair value was due to a decline in general interest rates. Record entry to adjust the bonds to their fair value for presentation in the December 31, 2024, balance sheet.
On January 1, 2023, Larkspur Corporation purchased a newly issued $1,500,000 bond. The bond matured on December 31, 2025, and paid interest at 6% every June 30 and December 31. The market interest rate was 8%. Larkspur's fiscal year-end is October 31, and the company had the intention and ability to hold the bond until its maturity date. The bond will be accounted using the amortized cost model. Calculate the price paid for the bond using a financial calculator or Excel functions. (Round answers to 2 decimal places, eg. 52.75.) the price paid for the bond is $ 1,421,367.95
On January 1, 2024, Rapid Airlines issued $260 million of its 10% bonds for $240 million. The bonds were priced to yield 12%. Interest is payable semiannually on June 30 and December 31. Rapid Airlines records interest at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2024, the fair value of the bonds was $249 million as determined by their market value in the over-the-counter market. Rapid determined that $1,000,000 of the increase in fair value was due to a decline in general interest rates. Required: 1. to 3. Prepare the journal entries to record interest on June 30, 2024 (the first interest payment), on December 31, 2024 (the second interest payment) and to adjust the bonds to their fair value for presentation in the December 31, 2024, balance sheet.
On January 1, 2023, Liu Corporation paid $242,952 to acquire bonds of Singh Investment Corp with a par value of $241,000. The annual contract rate on the bonds is 6.5% and interest is paid semiannually on June 30 and December 31. The bonds mature after three years. The market rate of Interest was 6.2%. Liu Corporation intends to hold the bonds until maturity. Required: 1. Prepare an amortization schedule for the investment showing only 2023. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. Enter all the amounts as positive values.) Cash Period Interest Period Ending Premium Amort. Interest Received Income Unamortized Premium Carrying Value Jan. 1/23 June 30/23 Dec. 31/23
On December 1, 2017, Cone Company issued its 10%, $550,000 face value bonds for $640,000, plus accrued interest. Interest is payable on November 1 and May 1. On December 31, 2019, the book value of the bonds, inclusive of the unamortized premium, was $580,000. On July 1, 2020, Cone reacquired the bonds at 98 plus accrued interest. Cone appropriately uses the straight-line method for the amortization because the results do not materially differ from those of the effective interest method.
On January 1, 2020, Vaughn Corporation issued $5,480,000 of 10% bonds at 101 due December 31, 2029. Vaughn paid $75,000 in bond issue costs when the bonds were issue to the market. These will be amortized over the life of the bond. The premium on the bonds is also being amortized on a straight-line basis over the 10 years. (Straight-line is not materially different in effect from the preferable "interest method".) The bonds are callable at 105 (i.e., at 105% of face amount), and on January 2, 2025, Vaughn called one-half of the bonds and retired them. Ignoring income taxes, compute the amount of loss, if any, to be recognized by Vaughn as a result of retiring the $2,740,000 of bonds in 2025. Loss on redemption $ Prepare the journal entry to record the retirement. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before…
On January 1, 2021, Rapid Airlines issued $275 million of its 10% bonds for $254 million. The bonds were priced to yield 12%. Interest is payable semiannually on June 30 and December 31. Rapid Airlines records interest at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2021, the fair value of the bonds was $264 million as determined by their market value in the over-the-counter market. Rapid determined that $1,000,000 of the increase in fair value was due to a decline in general interest rates. Required: 1. to 3. Prepare the journal entries to record interest on June 30, 2021 (the first interest payment), on December 31, 2021 (the second interest payment) and to adjust the bonds to their fair value for presentation in the December 31, 2021, balance sheet. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Answer is not complete.…
On January 1, 2024, Rupar Retallers purchased $100,000 of Anand Company bonds at a discount of $6,000. The Anand bonds pay 6% interest but were purchased when the market interest rate was 7% for bonds of similar risk and maturity. The bonds pay interest semiannually on June 30 and December 31 of each year. Rupar accounts for the bonds as a held-to-maturity Investment, and uses the effective interest method. In Rupar's December 31, 2024, journal entry to record the second period of Interest, Rupar would record a credit to interest revenue of Multiple Choice O O $3,000 $3,500 $1.300
On January 1, 2024, Rapid Airlines issued $245 million of its 10% bonds for $226 million. The bonds were priced to yield 12%. Interest is payable semiannually on June 30 and December 31. Rapid Airlines records interest at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2024, the fair value of the bonds was $234 million as determined by their market value in the over-the-counter market. Rapid determined that $1,000,000 of the increase in fair value was due to a decline in general interest rates. Questions: 1. to 3. Prepare the journal entries to record interest on June 30, 2024 (the first interest payment), on December 31, 2024 (the second interest payment) and to adjust the bonds to their fair value for presentation in the December 31, 2024, balance sheet.
On January 1, 2021, Tiny Tim Industries had outstanding $1,000,000 of 9% bonds with a book value of $965,500. The indenture specified a call price of $982,000. The bonds were issued previously at a price to yield 11% and interest payable semi-annually on July 1 and January 1. Tiny Tim called the bonds (retired them) on July 1, 2021. What is the amount of the loss on early extinguishment?