On January 1, 2017, Delaney Corporation issued five-year, 10% bonds payable with a face value of $2,800,000. The bonds were issued at 91 and pay interest on January 1 and July 1. Delaney amortizes bond discounts using the straight-line method. On December 31, 2019, Delaney retired the bonds early by purchasing them at a market price of 94. The company's fiscal year ends on December 31. ### Instructions for Bond Accounting1. **Journalize the Issuance of the Bonds** - Date: January 1, 2017. - Record the necessary journal entry to document the issuance of bonds on this date. Ensure to include the face value of the bonds, any discounts or premiums, and the cash received.2. **Record the Semiannual Interest Payment and Amortization** - Date: July 1, 2017. - Prepare the journal entry for the semiannual interest payment. Include calculations for the interest expense and the amortization of any bond discount or premium.3. **Record the Interest Accrual and Discount Amortization** - Date: December 31, 2017. - Accrue the annual interest expense and adjust for the amortization of the discount or premium on the bonds. Ensure this entry aligns with the end of the fiscal year.4. **Calculate the Carrying Value of the Bonds Payable** - Date: December 31, 2019. - Calculate the bonds' carrying value before their retirement. This typically involves adjusting the face value of the bonds for any unamortized discount or premium.5. **Calculate the Gain or Loss on Retirement of Bonds Payable** - Date: December 31, 2019. - Calculate the gain or loss incurred upon the retirement of the bonds. Indicate where this gain or loss should be reported in the financial statements. Typically, gains and losses on bond retirements are recognized in the income statement under other income or expenses.### Detailed Explanations:- **Journal Entries:** Provide formal records for the issuance, interest payments, and amortization of bonds.- **Carrying Value Calculation:** Involves the bond's book value, which is the face value adjusted for any remaining unamortized discount or premium.- **Gain or Loss Calculation:** Determines the financial impact of retiring the bonds earlier or later than their maturity date, impacting net income.Following these steps ensures accurate and compliant financial reporting regarding bond transactions.

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On January 1, 2017, Delaney Corporation issued five-year, 10% bonds payable with a face value of $2,800,000. The bonds were issued at 91 and pay interest on January 1 and July 1. Delaney amortizes bond discounts using the straight-line method. On December 31, 2019, Delaney retired the bonds early by purchasing them at a market price of 94. The company's fiscal year ends on December 31.

On January 1, 2017, Delaney Corporation issued five-year, 10% bonds payable with a face value of $2,800,000. The bonds were issued at 91 and pay interest on January 1 and July 1. Delaney amortizes bond discounts using the straight-line method. On December 31, 2019, Delaney retired the bonds early by purchasing them at a market price of 94. The company's fiscal year ends on December 31.

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

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 9RE

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