acacantikbanget
Apr 5, 2012, 02:37 AM
Book name: accounting principles 9th edition problem :- BYP15-4 chapter 15
On January 1, 2008, Carlin Corporation issued $2,400,000 of 5 year, 8% bonds at 95; the bonds pay interest semiannually on July 1 and January 1. By January 1, 2010, the market rate of interest for bonds of risk similar to those of Carlin Corporation had risen. As a result the market value of those bonds was $ 2,000,000 on January 1, 2010-below their carrying value. Andrea Carlin, president of the company, suggests repurchasing all of these bonds in the open market at the $2,000,000 price. To do so the company will have to issue $2,000,000 (face value) of new 10-year, 11% bonds at par. The president asks you, as controller, “What is the feasibility of my proposed repurchase plan?”
Instructions:
(a) What is the carrying value of the outstanding Carlin Corporation 5-year bonds on January 1, 2010? (Assume straight-line amortization.)
(b) Prepare the journal entry to retire the 5-year bonds on January 1, 2010. Prepare the journal entry to issue the new 10-year bonds.
(c) Prepare a short memo to the president in response to her request for advice. List the economic factors that you believe should be considered for her repurchase proposal.
PS: please help me... ;(
On January 1, 2008, Carlin Corporation issued $2,400,000 of 5 year, 8% bonds at 95; the bonds pay interest semiannually on July 1 and January 1. By January 1, 2010, the market rate of interest for bonds of risk similar to those of Carlin Corporation had risen. As a result the market value of those bonds was $ 2,000,000 on January 1, 2010-below their carrying value. Andrea Carlin, president of the company, suggests repurchasing all of these bonds in the open market at the $2,000,000 price. To do so the company will have to issue $2,000,000 (face value) of new 10-year, 11% bonds at par. The president asks you, as controller, “What is the feasibility of my proposed repurchase plan?”
Instructions:
(a) What is the carrying value of the outstanding Carlin Corporation 5-year bonds on January 1, 2010? (Assume straight-line amortization.)
(b) Prepare the journal entry to retire the 5-year bonds on January 1, 2010. Prepare the journal entry to issue the new 10-year bonds.
(c) Prepare a short memo to the president in response to her request for advice. List the economic factors that you believe should be considered for her repurchase proposal.
PS: please help me... ;(