Ascertain whether the 11% bonds are issued at par, at a discount, or at a premium.

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Answer 1

Question

Chapter 14, Problem 8C

1. a

To determine

Ascertain whether the 11% bonds are issued at par, at a discount, or at a premium.

b.

To determine

State whether the amount of interest expense for the 11 % bonds using the effective interest method of amortization is higher in the first or second year of the life of the bond issuance.

2. a

To determine

Explain the manner in which the gain or loss on early extinguishment of debt is ascertained and state whether the early extinguishment of bond resulted in gain or loss.

b.

To determine

Explain the manner in which the early extinguishment of bond is reported on the income statement.

3.a

To determine

Explain whether the net income is affected while recording the conversion of the 10% convertible bonds into common stock under book value method and explain the rationale for the book value method.

b.

To determine

Explain whether the net income is affected while recording the conversion of the 10% convertible bonds into common stock under market value method and explain the rationale for the market value method.

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Question 3Footfall Manufacturing Ltd. reports the following financialinformation at the end of the current year: Net Sales $100,000 Debtor's turnover ratio (based on net sales) 2 Inventory turnover ratio 1.25 fixed assets turnover ratio 0.8 Debt to assets ratio 0.6 Net profit margin 5% gross profit margin 25% return on investments 2% Use the given information to fill out the templates for incomestatement and balance sheet given below: Income Statement of Footfall Manufacturing Ltd. for the year endingDecember 31, 20XX(in $) Sales 100,000 Cost of goods sold gross profit other expenses earnings before tax tax @ 50% Earnings after tax Balance Sheet of Footfall Manufacturing Ltd. as at December 31, 20XX(in $) Liabilities Amount Assets Amount Equity Net fixed assets long term debt 50,000 Inventory short term debt debtors cash Total Total

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Answer 2

Question

Chapter 14, Problem 8C

1. a

To determine

Ascertain whether the 11% bonds are issued at par, at a discount, or at a premium.

b.

To determine

State whether the amount of interest expense for the 11 % bonds using the effective interest method of amortization is higher in the first or second year of the life of the bond issuance.

2. a

To determine

Explain the manner in which the gain or loss on early extinguishment of debt is ascertained and state whether the early extinguishment of bond resulted in gain or loss.

b.

To determine

Explain the manner in which the early extinguishment of bond is reported on the income statement.

3.a

To determine

Explain whether the net income is affected while recording the conversion of the 10% convertible bonds into common stock under book value method and explain the rationale for the book value method.

b.

To determine

Explain whether the net income is affected while recording the conversion of the 10% convertible bonds into common stock under market value method and explain the rationale for the market value method.

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Answer 3

Question

Chapter 14, Problem 8C

1. a

To determine

Ascertain whether the 11% bonds are issued at par, at a discount, or at a premium.

b.

To determine

State whether the amount of interest expense for the 11 % bonds using the effective interest method of amortization is higher in the first or second year of the life of the bond issuance.

2. a

To determine

Explain the manner in which the gain or loss on early extinguishment of debt is ascertained and state whether the early extinguishment of bond resulted in gain or loss.

b.

To determine

Explain the manner in which the early extinguishment of bond is reported on the income statement.

3.a

To determine

Explain whether the net income is affected while recording the conversion of the 10% convertible bonds into common stock under book value method and explain the rationale for the book value method.

b.

To determine

Explain whether the net income is affected while recording the conversion of the 10% convertible bonds into common stock under market value method and explain the rationale for the market value method.

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Answer 4

Question

Chapter 14, Problem 8C

1. a

To determine

Ascertain whether the 11% bonds are issued at par, at a discount, or at a premium.

b.

To determine

State whether the amount of interest expense for the 11 % bonds using the effective interest method of amortization is higher in the first or second year of the life of the bond issuance.

2. a

To determine

Explain the manner in which the gain or loss on early extinguishment of debt is ascertained and state whether the early extinguishment of bond resulted in gain or loss.

b.

To determine

Explain the manner in which the early extinguishment of bond is reported on the income statement.

3.a

To determine

Explain whether the net income is affected while recording the conversion of the 10% convertible bonds into common stock under book value method and explain the rationale for the book value method.

b.

To determine

Explain whether the net income is affected while recording the conversion of the 10% convertible bonds into common stock under market value method and explain the rationale for the market value method.

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Answer 5

Chapter 14, Problem 8C

1. a

To determine

Ascertain whether the 11% bonds are issued at par, at a discount, or at a premium.

b.

To determine

State whether the amount of interest expense for the 11 % bonds using the effective interest method of amortization is higher in the first or second year of the life of the bond issuance.

2. a

To determine

Explain the manner in which the gain or loss on early extinguishment of debt is ascertained and state whether the early extinguishment of bond resulted in gain or loss.

b.

To determine

Explain the manner in which the early extinguishment of bond is reported on the income statement.

3.a

To determine

Explain whether the net income is affected while recording the conversion of the 10% convertible bonds into common stock under book value method and explain the rationale for the book value method.

b.

To determine

Explain whether the net income is affected while recording the conversion of the 10% convertible bonds into common stock under market value method and explain the rationale for the market value method.

Answer 6

Chapter 14, Problem 8C

1. a

To determine

Ascertain whether the 11% bonds are issued at par, at a discount, or at a premium.

Answer 7

Chapter 14, Problem 8C

1. a

To determine

Ascertain whether the 11% bonds are issued at par, at a discount, or at a premium.

Answer 8

b.

To determine

State whether the amount of interest expense for the 11 % bonds using the effective interest method of amortization is higher in the first or second year of the life of the bond issuance.

Answer 9

b.

To determine

State whether the amount of interest expense for the 11 % bonds using the effective interest method of amortization is higher in the first or second year of the life of the bond issuance.

Answer 10

2. a

To determine

Explain the manner in which the gain or loss on early extinguishment of debt is ascertained and state whether the early extinguishment of bond resulted in gain or loss.

Answer 11

2. a

To determine

Explain the manner in which the gain or loss on early extinguishment of debt is ascertained and state whether the early extinguishment of bond resulted in gain or loss.

Answer 12

b.

To determine

Explain the manner in which the early extinguishment of bond is reported on the income statement.

Answer 13

b.

To determine

Explain the manner in which the early extinguishment of bond is reported on the income statement.

Answer 14

3.a

To determine

Explain whether the net income is affected while recording the conversion of the 10% convertible bonds into common stock under book value method and explain the rationale for the book value method.

Answer 15

3.a

To determine

Explain whether the net income is affected while recording the conversion of the 10% convertible bonds into common stock under book value method and explain the rationale for the book value method.

Answer 16

b.

To determine

Explain whether the net income is affected while recording the conversion of the 10% convertible bonds into common stock under market value method and explain the rationale for the market value method.

Answer 17

b.

To determine

Explain whether the net income is affected while recording the conversion of the 10% convertible bonds into common stock under market value method and explain the rationale for the market value method.

Answer 18

Expert Solution & Answer

Answer 19

Expert Solution & Answer

Answer 20

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Answer 21

Ch. 14 - Prob. 1GI Ch. 14 - Why does issuing debt result in an income tax...Ch. 14 - What is a bond? Define face value, maturity date,...Ch. 14 - What is the difference between a mortgage bond and...Ch. 14 - Prob. 5GI Ch. 14 - Prob. 6GI Ch. 14 - Prob. 7GI Ch. 14 - Prob. 8GI Ch. 14 - Prob. 9GI Ch. 14 - Prob. 10GI

Ascertain whether the 11% bonds are issued at par, at a discount, or at a premium.

Solution Summary: The author explains that 11% bonds are issued at par, at a discount, or at premium. The interest expense for the 11 % bonds is higher in the first or second year of the bond issuance.

Ascertain whether the 11% bonds are issued at par, at a discount, or at a premium.

State whether the amount of interest expense for the 11 % bonds using the effective interest method of amortization is higher in the first or second year of the life of the bond issuance.

Explain the manner in which the gain or loss on early extinguishment of debt is ascertained and state whether the early extinguishment of bond resulted in gain or loss.

Explain the manner in which the early extinguishment of bond is reported on the income statement.

Explain whether the net income is affected while recording the conversion of the 10% convertible bonds into common stock under book value method and explain the rationale for the book value method.

Explain whether the net income is affected while recording the conversion of the 10% convertible bonds into common stock under market value method and explain the rationale for the market value method.

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Chapter 14 Solutions