Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method. The amount of interest expenses that should be reported in consolidated income statement for 20X3.

Question

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Answer 1

Question

Chapter 8, Problem 8.11E

a

To determine

Concept introduction:

Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method.

The amount of interest expenses that should be reported in consolidated income statement for 20X3.

b

To determine

Concept introduction:

Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method.

The amount of gain or loss on constructive bond retirement to be reported in 20X3

c

To determine

Concept introduction:

Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method.

Preparation of elimination entries for consolidation work sheet for December 31, 20X3

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Answer 2

Question

Chapter 8, Problem 8.11E

a

To determine

Concept introduction:

Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method.

The amount of interest expenses that should be reported in consolidated income statement for 20X3.

b

To determine

Concept introduction:

Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method.

The amount of gain or loss on constructive bond retirement to be reported in 20X3

c

To determine

Concept introduction:

Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method.

Preparation of elimination entries for consolidation work sheet for December 31, 20X3

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Answer 3

Question

Chapter 8, Problem 8.11E

a

To determine

Concept introduction:

Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method.

The amount of interest expenses that should be reported in consolidated income statement for 20X3.

b

To determine

Concept introduction:

Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method.

The amount of gain or loss on constructive bond retirement to be reported in 20X3

c

To determine

Concept introduction:

Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method.

Preparation of elimination entries for consolidation work sheet for December 31, 20X3

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Answer 4

Question

Chapter 8, Problem 8.11E

a

To determine

Concept introduction:

Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method.

The amount of interest expenses that should be reported in consolidated income statement for 20X3.

b

To determine

Concept introduction:

Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method.

The amount of gain or loss on constructive bond retirement to be reported in 20X3

c

To determine

Concept introduction:

Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method.

Preparation of elimination entries for consolidation work sheet for December 31, 20X3

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Answer 5

Chapter 8, Problem 8.11E

a

To determine

Concept introduction:

Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method.

The amount of interest expenses that should be reported in consolidated income statement for 20X3.

b

To determine

Concept introduction:

Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method.

The amount of gain or loss on constructive bond retirement to be reported in 20X3

c

To determine

Concept introduction:

Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method.

Preparation of elimination entries for consolidation work sheet for December 31, 20X3

Answer 6

Chapter 8, Problem 8.11E

a

To determine

Concept introduction:

Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method.

The amount of interest expenses that should be reported in consolidated income statement for 20X3.

Answer 7

Chapter 8, Problem 8.11E

a

To determine

Concept introduction:

Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method.

The amount of interest expenses that should be reported in consolidated income statement for 20X3.

Answer 8

b

To determine

Concept introduction:

Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method.

The amount of gain or loss on constructive bond retirement to be reported in 20X3

Answer 9

b

To determine

Concept introduction:

Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method.

The amount of gain or loss on constructive bond retirement to be reported in 20X3

Answer 10

c

To determine

Concept introduction:

Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method.

Preparation of elimination entries for consolidation work sheet for December 31, 20X3

Answer 11

c

To determine

Concept introduction:

Effective interest method of bond amortization: In this method of amortization the interest expense in a given year will be linked with the amount of the bond’s book value. When the sales of bonds take place at a premium, the value of the premium must be amortized to interest expense during the life of the bond. The preferred method of amortization is the effective interest method.

Preparation of elimination entries for consolidation work sheet for December 31, 20X3

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 8 - Prob. 8.1Q Ch. 8 - What is meant by a constructive bond retirement in...Ch. 8 - Prob. 8.3Q Ch. 8 - Prob. 8.4Q Ch. 8 - When a parent company sells land to a subsidiary...Ch. 8 - Prob. 8.7Q Ch. 8 - Prob. 8.8Q Ch. 8 - Prob. 8.9Q Ch. 8 - Prob. 8.10Q Ch. 8 - Prob. 8.11Q

Solution Summary: The author introduces the effective interest method of bond amortization, where the interest expense in a given year is linked with the amount of the bond’s book value.

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Chapter 8 Solutions