Early Extinguishment debt
When the debt obligations are retired before its scheduled maturity date, the transactions are referred to as early extinguishment of debt. The debt is paid at the market price of the debt and for any difference between the book value of the debt with its market price, the business recognizes the gain or loss on early extinguishment of the debt.
Effective interest rate of amortization bond
Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but a constant percentage rate.
To Prepare: The
Want to see the full answer?
Check out a sample textbook solutionChapter 14 Solutions
INTERMEDIATE ACCOUNTING (LL) W/CONNECT
- View Policies Current Attempt in Progress A $650000 bond was retired at 102 when the carrying value of the bond was $677000. The entry to record the retirement would include a O loss on bond redemption of $14000. O loss on bond redemption of $13000. O gain on bond redemption of $13000. O gain on bond redemption of $14000. eTextbook and Media Save for Later Attempts: 0 of 2 used Submit Answer 3 5 6 7 8 9 e h b in marrow_forwardExercise 10.9 (Algo) Accounting for Bonds Issued at a Premium: Issuance, Interest Payments, and Retirement (LO10-5, LO10-6) Xonic Corporation issued $8.5 million of 20-year, 8 percent bonds on April 1, 2021, at 102. Interest is paid on March 31 and September 30 of each year, and all of the bonds in the issue mature on March 31, 2041 Xonic's fiscal year ends on December 31. Prepare the following journal entries. a. April 1, 2021, to record the issuance of the bonds. b. September 30, 2021, to pay interest and to amortize the bond premium. c. March 31, 2041, to pay interest, amortize the bond premium, and retire the bonds at maturity (make two separate entries). Assume an adjusting entry was made on December 31, 2040, to recognize interest from October 1 to December 31. d. What is the effect of amortizing the bond premium on (1) annual net income and (2) annual net cash flow from operating activities. (ignore possible income tax effects.) (If no entry is required for a transaction/event,…arrow_forwardQd 34.arrow_forward
- b A e Y l 51% Ô 10:58 LTE abc SAVE Теxt Pen Brush Title On 6/30/12, a company paid $106,000 to retire a bond before maturity. The company recorded a $6,000 loss as part of the transaction. Which of the following must be true regarding this transaction? (check all that apply) The face value of the bond was $100,000 The company paid more than the current fair value of the bond to retire it. The market interest rate had increased since the bond was issued The face value of the bond was $106,000 The market interest rate had decreased since the bond was issued В I U !!! !!!arrow_forwardExercise 14-23 (Algo) Early extinguishment [LO14-5] The balance sheet of River Electronics Corporation as of December 31, 2023, included 12.50% bonds having a face amount of $91.8 million. The bonds had been issued in 2016 and had a remaining discount of $4.8 million at December 31, 2023. On January 1, 2024, River Electronics called the bonds before their scheduled maturity at the call price of 105. Required: Prepare the journal entry by River Electronics to record the redemption of the bonds at January 1, 2024. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.arrow_forwardch14 Q.15 The issue price of the bonds? cash? discound on bonds payable? bonds payable?arrow_forward
- Jj.59.arrow_forwardv2.cengagenow.com 403114 Discount Amortization On the first day of the fiscal year, a company issues a $1,100,000, 7%, 7-year bond that pays semiannual interest of $38,500 ($1,100,000 x 7% x 1/2), receiving cash of $1,041,903. Journalize the first interest payment and the amortization of the related bond discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.arrow_forwardPlease answerarrow_forward
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning