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pready · Dec 3, 2007, 10:48 PM

On April 1, 2006 a company issued $500,000, 9% bonds for $537,868 including accrued interest. Interest is payable annually on Jan 1, and bonds mature on Jan 1, 2016

On July 1, 2008 a company retired $150,000 of the bonds at 102 plus accrued interest. The company uses straight-line amortization.

On April 1, 2006 I computed the interest for Jan 1 - April 1 2006 as $11,250 and I computed the Premium on Bonds Payable at $26,618.

Question: How do compute the retirement of the bonds? I cannot figure out what to do next. Please help: Thanks!!

pready · Dec 6, 2007, 05:20 PM

Here is what I did, though I am not sure if it is correct. :confused:

(A) Cash Received $537,868
Less:
Face Amt of Bonds $500,000
Acrued Interest
(500,000*9%*3/12) 11,250 511,250
Premium on Bonds payable $26,618

Journal Entries
Date Account Name Dr Cr
1-Apr-06 Cash 537,868
Bonds Payable 500,000
Interest Expense 11,250
Premium on Bonds Payable 26,618

(B) Face Amt of Bonds Retired $150,000
Reacquisition Price($150,000*102%) $153,000
Acrued Interest($150,000*9%*6/12) $6,750
Amortized Premium $4,778
($26,618/117 Months Outstanding *21 Months Used)
Unamortized Premium on Full amount of Bonds $21,840
Fraction of Bonds ($150,000/$500,000) 0.3
Unamortized Premium on $150,000 Bonds $6,552
($21,840 * 0.3)

Reacquistion Price of Bands Payable $153,000
Acrued Interest 6,750
Cash Paid $159,750
Less:
Bonds Payable $150,000
Premium on Bonds payable 6,552 156,552
Loss on Redemption $3,198

Journal Entries
Date Account Name Dr Cr
1-Jul-08 Bonds Payable 150,000
Premium on Bonds payable 6,552
Loss on Redemption 3,198
Cash 159,750

Does the computations look right??
Sorry the format changes when I post this!!

luai · May 25, 2008, 08:16 PM

Plzzzzzzzz from where did you get this question because this question in my midterm exam

Email me [email protected]

morgaine300 · May 25, 2008, 08:58 PM

luai, we aren't here to do your exams for you! (Also, didn't anyone ever tell you not to just put your email up some place public like this.)

If you both have the same question, it likely could have come from the test bank for the textbook. In which case, it makes me wonder if pready's question is also from an exam??

Does anyone have a sense of honor anymore?

luai · May 25, 2008, 09:03 PM

Thanks for your comment but from where I can get this test banks?

morgaine300 · May 26, 2008, 02:37 PM

Only the instructors can get the test banks.

Batumi1987 · Apr 24, 2009, 10:31 AM

Originally Posted by pready

Here is what I did, though I am not sure if it is correct. :confused:

(A) Cash Received $537,868
Less:
Face Amt of Bonds $500,000
Acrued Interest
(500,000*9%*3/12) 11,250 511,250
Premium on Bonds payable $26,618

Journal Entries
Date Account Name Dr Cr
1-Apr-06 Cash 537,868
Bonds Payable 500,000
Interest Expense 11,250
Premium on Bonds Payable 26,618

(B) Face Amt of Bonds Retired $150,000
Reacquisition Price($150,000*102%) $153,000
Acrued Interest($150,000*9%*6/12) $6,750
Amortized Premium $4,778
($26,618/117 Months Outstanding *21 Months Used)
Unamortized Premium on Full amount of Bonds $21,840
Fraction of Bonds ($150,000/$500,000) 0.3
Unamortized Premium on $150,000 Bonds $6,552
($21,840 * 0.3)

Reacquistion Price of Bands Payable $153,000
Acrued Interest 6,750
Cash Paid $159,750
Less:
Bonds Payable $150,000
Premium on Bonds payable 6,552 156,552
Loss on Redemption $3,198

Journal Entries
Date Account Name Dr Cr
1-Jul-08 Bonds Payable 150,000
Premium on Bonds payable 6,552
Loss on Redemption 3,198
Cash 159,750

Does the computations look right???
Sorry the format changes when I post this!!!

Hi, can you help me?

Here is a question!

The 31 dec 2004, balance sheet of dodge corporation was:

9% bonds payable due 2013 dec 31-------1,400,000
Unamortized premium----------------------37800

The bonds were issued on dec 31, 2003, at 103, with interest payable on July 1 and December 31. Dodge is using straight-line amortization.

On march 1, 2005, DODGE retired 560,000 of bonds at 98 plus accrued interest.

WHAT SHOULD DODGE RECORD AS A GAIN ON RETIREMENT OF THIS BOND?

a.26320
b.15120
c.26040
d.28000

And 2nd
On October 1, 2004, lyman co, purchased to lod to maturity, 300, 1000, 9% bonds for 312000, an additional 19000 was paid for accrued interest, interest is paid semiannyally on decemer 1 and June 1 and the bonds mature on December 1, 2008, lyman uses straight-line amortization, ignoring taxes, the amount reported in Lymans' 2004 income statement from this investment should be

a. 6750
b.6030
c. 7470
d.8190

Thanks in advance

morgaine300 · Apr 24, 2009, 10:01 PM

Batumi, first read the guidelines for posting homework problems:
Ask Me Help Desk - Announcements in Forum : Homework Help
I'm not going to just tell you which answer to pick.

Second, you just tacked this onto a year-old thread. Just wasted a bit of time there reading through the whole thread just to find some totally different question at the bottom.

koko12 · Jul 14, 2012, 07:44 PM

@morgaine300

You seem to be arrogant and does not have any honour at all in answering and replying people here.

You either answer the question or be silent. No need to put yourself in deep . Please find yourself a job and try to respect people thoughts.

Do not take that personally, but it is the truth.

Have a life