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On January 2, 2018, Crane Corporation, a small company that follows ASPE, issued $1.8 million of 11% bonds at 98 due on December 31, 2027. Legal and other costs of $180,000 were incurred in connection with the issue. Crane has a policy of capitalizing and amortizing the legal and other costs incurred by including them with the bond recorded at the date of issuance. Interest on the bonds is payable each December 31. The $180,000 of issuance costs are being deferred and amortized on a straight-line basis over the 10- year term of the bonds. The discount on the bonds is also being amortized on a straight-line basis over the 10 years. (The straight-line method is not materially different in its effect compared with the effective interest method.) The bonds are callable at 103 (that is, at 103% of their face amount), and on January 2, 2023, the company called a face amount of $1,000,000 of the bonds and retired them.

On January 2, 2018, Crane Corporation, a small company that follows ASPE, issued $1.8 million of 11% bonds at 98 due on December 31, 2027. Legal and other costs of $180,000 were incurred in connection with the issue. Crane has a policy of capitalizing and amortizing the legal and other costs incurred by including them with the bond recorded at the date of issuance. Interest on the bonds is payable each December 31. The $180,000 of issuance costs are being deferred and amortized on a straight-line basis over the 10- year term of the bonds. The discount on the bonds is also being amortized on a straight-line basis over the 10 years. (The straight-line method is not materially different in its effect compared with the effective interest method.) The bonds are callable at 103 (that is, at 103% of their face amount), and on January 2, 2023, the company called a face amount of $1,000,000 of the bonds and retired them.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 2, 2018, Crane Corporation, a small company that follows ASPE, issued $1.8 million of 11% bonds at 98 due on December 31, 2027. Legal and other costs of $180,000 were incurred in connection with the issue. Crane has a policy of capitalizing and amortizing the legal and other costs incurred by including them with the bond recorded at the date of issuance. Interest on the bonds is payable each December 31. The $180,000 of issuance costs are being deferred and amortized on a straight-line basis over the 10- year term of the bonds. The discount on the bonds is also being amortized on a straight-line basis over the 10 years. (The straight-line method is not materially different in its effect compared with the effective interest method.) The bonds are callable at 103 (that is, at 103% of their face amount), and on January 2, 2023, the company called a face amount of $1,000,000 of the bonds and retired them. (a) Ignoring income taxes, calculate the amount of loss, if any, that the company needs to recognize as a result of retiring $1,000,000 of bonds in 2023. Prepare the journal entry to record the retirement. (Round answer to O decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Date Account Titles and Explanation Jan. 2, 2023 Debit Credit
Transcribed Image Text:On January 2, 2018, Crane Corporation, a small company that follows ASPE, issued $1.8 million of 11% bonds at 98 due on December 31, 2027. Legal and other costs of $180,000 were incurred in connection with the issue. Crane has a policy of capitalizing and amortizing the legal and other costs incurred by including them with the bond recorded at the date of issuance. Interest on the bonds is payable each December 31. The $180,000 of issuance costs are being deferred and amortized on a straight-line basis over the 10- year term of the bonds. The discount on the bonds is also being amortized on a straight-line basis over the 10 years. (The straight-line method is not materially different in its effect compared with the effective interest method.) The bonds are callable at 103 (that is, at 103% of their face amount), and on January 2, 2023, the company called a face amount of $1,000,000 of the bonds and retired them. (a) Ignoring income taxes, calculate the amount of loss, if any, that the company needs to recognize as a result of retiring $1,000,000 of bonds in 2023. Prepare the journal entry to record the retirement. (Round answer to O decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Date Account Titles and Explanation Jan. 2, 2023 Debit Credit
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