ACC - Chapter 14 (CPA)

On January 1, 2018, Doty Co. redeemed its 15-year bonds of $7,000,000 par value for 102. They were originally issued on January 1, 2006 at 92 with a maturity date of January 1, 2021. Doty amortizes discounts and premiums using the straight-line method. What amount of loss should Doty recognize on the redemption of these bonds (ignore taxes)? a. $252,000 b. $168,000 c. $140,000 d. $0

a. $252,000

On July 1, 2016, Noble, Inc. issued 9% bonds in the face amount of $10,000,000, which mature on July 1, 2022. The bonds were issued for $9,560,000 to yield 10%, resulting in a bond discount of $440,000. Noble uses the effective-interest method of amortizing bond discount. Interest is payable annually on June 30. At June 30, 2018, Noble's unamortized bond discount should be a. $322,400. b. $340,000. c. $352,000. d. $310,000.

a. $322,400.

On July 1, 2018, Spear Co. issued 4,000 of its 10%, $1,000 bonds at 99 plus accrued interest. The bonds are dated April 1, 2018 and mature on April 1, 2028. Interest is payable semiannually on April 1 and October 1. What amount did Spear receive from the bond issuance? a. $4,060,000 b. $4,000,000 c. $3,960,000 d. $3,860,000

a. $4,060,000

On January 1, 2018, Solis Co. issued its 10% bonds in the face amount of $8,000,000, which mature on January 1, 2028. The bonds were issued for $9,080,000 to yield 8%, resulting in bond premium of $1,080,000. Solis uses the effective-interest method of amortizing bond premium. Interest is payable annually on December 31. At December 31, 2018, Solis's adjusted unamortized bond premium should be a. $1,080,000. b. $1,006,400. c. $972,000. d. $812,000.

b. $1,006,400.

On January 1, 2018, Huff Co. sold $5,000,000 of its 10% bonds for $4,426,480 to yield 12%. Interest is payable semiannually on January 1 and July 1. What amount should Huff report as interest expense for the six months ended June 30, 2018? a. $221,330 b. $250,000 c. $265,589 d. $300,000

c. $265,589

On June 30, 2018, Omara Co. had outstanding 8%, $8,000,000 face amount, 15-year bonds maturing on June 30, 2028. Interest is payable on June 30 and December 31. The unamortized balance in the bond discount account on June 30, 2018 was $360,000. On June 30, 2018, Omara acquired all of these bonds at 94 and retired them. What net carrying amount should be used in computing gain or loss on this early extinguishment of debt? a. $7,920,000. b. $7,720,000. c. $7,640,000. d. $7,520,000.

c. $7,640,000.

A ten-year bond was issued in 2016 at a discount with a call provision to retire the bonds. When the bond issuer exercised the call provision on an interest date in 2018, the carrying amount of the bond was less than the call price. The amount of bond liability removed from the accounts in 2018 should have equaled the a. call price. b. call price less unamortized discount. c. face amount less unamortized discount. d. face amount plus unamortized discount.

c. face amount less unamortized discount.

Paige Co. took advantage of market conditions to refund debt. This was the fourth refunding operation carried out by Paige within the last three years. The excess of the carrying amount of the old debt over the amount paid to extinguish it should be reported as a a. gain, net of income taxes. b. loss, net of income taxes. c. part of continuing operations. d. deferred credit to be amortized over the life of the new debt.

c. part of continuing operations.

Eddy Co. is indebted to Cole under a $1,000,000, 12%, three-year note dated December 31, 2016. Because of Eddy's financial difficulties developing in 2018, Eddy owed accrued interest of $120,000 on the note at December 31, 2018. Under a troubled debt restructuring, on December 31, 2018, Cole agreed to settle the note and accrued interest for a tract of land having a fair value of $900,000. Eddy's acquisition cost of the land is $725,000. Ignoring income taxes, on its 2018 income statement Eddy should report as a result of the troubled debt restructuring Gain on Disposal Restructuring Gain a. $395,000 $0 b. $275,000 $0 c. $175,000 $100,000 d. $175,000 $220,000

d. $175,000 $220,000

On January 1, 2013, Goll Corp. issued 3,000 of its 10%, $1,000 bonds for $3,120,000. These bonds were to mature on January 1, 2023 but were callable at 101 any time after December 31, 2016. Interest was payable semiannually on July 1 and January 1. On July 1, 2018, Goll called all of the bonds and retired them. Bond premium was amortized on a straight-line basis. Before income taxes, Goll's gain or loss in 2018 on this early extinguishment of debt was a. $90,000 gain. b. $36,000 gain. c. $30,000 loss. d. $24,000 gain.

d. $24,000 gain.

On its December 31, 2017 balance sheet, Emig Corp. reported bonds payable of $6,000,000 The bonds had been issued at par. On January 2, 2018, Emig retired $3,000,000 of the outstanding bonds at par plus a call premium of $70,000. What amount should Emig report in its 2018 income statement as loss on extinguishment of debt (ignore taxes)? a. $0 b. $30,000 c. $35,000 d. $70,000

d. $70,000