Chapter 12, Problem 12.9BE

10) Given the following Bond Amortization Table, answer the multiple choice question below the Table. Interest Unamortized DATE PMT Expense Amortization Amortization Carrying Value 1/1/2018 $ 45,242 $ 654,758 6/30/2018 $ 28,000 $ 12/31/2018 $ 28,000 $ 6/30/2019 $ 28,000 $ 12/31/2019 $ 28,000 $ 6/30/2020 $ 28,000 $ 40,505 $ 35,530 $ 32,738 $ 4,738 $ 659,495 4,975 $ 5,224 $ 32,975 $ 664,470 33,224 $ 33,485 $ 30,306 $ 669,694 5,485 $ 24,822 $ 675,178 33,759 $ 5,759 $ 19,063 $ 680,937 34,047 $ 34,349 $ 13,016 $ 6,667 $ 0.00 $ 12/31/2020 $ 28,000 $ 6,047 $ 686,984 6/30/2021 $ 28,000 $ 6,349 $ 693,333 12/31/2021 $ 28,000 $ 34,667 $ 6,667 $ 700,000 Question: If this bond were retired on January 1, 2021 at $690,000, then the journal entry on January 1, 2021 would show: A. Credit to Discount on Bond Payable in the amount of $3,016 B. Debit to Discount on Bond Payable in the amount of $3,016 C. Gain in the amount of $3,016 D. Loss in the amount of $3,016

1. Which of the following modification of terms will not qualify for derecognition of financial liability? * a. A P1,000,000 bonds payable was due for payment on September 01, 2019. The maturity date has been extended up to September 01, 2020 with the face amount still the same. b. The market rate of interest associated with 2,500 bonds was 10% when these bonds were sold. Present value of the bonds was computed based on this percentage. Months later, prices in the market significantly changed making a shift from 10% to 11.5% effective rate. c. P375,000 of interest that accrued from the last date of interest payment up to the present time has been condoned or forgiven. The face amount though of P5,000,000 is unchanged and would be paid at the original date stated on the bond indentures. d. A previous P2,000,000 bonds was replaced by another bond payable of the same amount but with a different nominal rate of 9% instead of the old 11% rate.

H1.

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Which of the following debt should be classified as a current liability on December 31, 2020 in the Company's balance sheet? A. $24 million of 6% bonds were issued for $24 million on May 31, 1999. The bonds mature on May 31, 2029, but bondholders have the option of calling (demanding payment on) the bonds on May 31, 2021. However, the option to call is not expected to be exercised, given prevailing market conditions. B. Blues Company borrowed $100,000 through a 7% note payable dated December 31, 2016. Interest is due annually on December 31, and the principal is due on December 31 2021. The note will be paid on December 31, 2021, with amounts Blues Company accumulated in a long-term investment fund classified as a long-term asset. a. B only. b. Neither A nor B c. A only.

Which of the following modification of terms will not qualif, for derecognition of financial liability? * a. A P1,000,000 bonds payable was due for payment on September 01, 2019. The maturity date has been extended up to September 01, 2020 with the face amount still the same. b. The market rate of interest associated with 2,500 bonds was 10% when these bonds were sold. Present value of the bonds was computed based on this percentage. Months later, prices in the market significantly changed making a shift from 10% to 11.5% effective rate. c. P375,000 of interest that accrued from the last date of interest payment up to the present time has been condoned or forgiven. The face amount though of P5,000,000 is unchanged and would be paid at the original date stated on the bond indentures. d. A previous P2,000,000 bonds was replaced by another bond payable of the same amount but with a different nominal rate of 9% instead of the old 11% rate.

On January 1, 2020, Carla Vista Corp. sold at 103, 100 of its $1,000 face value, five-year, 10% non-convertible, retractable bonds. The retraction feature allows the holder to redeem the bonds at an amount equal to three times net income, to a maximum of $1,275 per bond. Carla Vista has net income of $267, $373, and $439 for the fiscal years ended December 31, 2020, 2021, and 2022, respectively. Carla Vista Corp. prepares its financial statements in accordance with ASPE. Prepare the entry to record the issuance of the bonds. (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) Account Titles and Explanation Debit Credit

Which statement is correct when the effective-interest method is used to amortize bond premium or discount? Group of answer choices   The interest expense increases each period if the bonds were issued at a premium.   The carrying amount at the end of the first year would be highest if the bonds were issued at a discount.   The periodic amortization will increase regardless of whether the bonds were issued at either a discount or a premium.   The periodic amortization will increase or decrease depending on whether the bonds were issued at a premium or at a discount.