BUSINESS COLLEGE

, Inc. retires a $15 million (face value) bond issue when the carrying value of the bonds is $13 million, but the market value of the bonds is $16 million. The entry to record the retirement will include: Select one: a. A gain of $2 million b. A loss of $2 million c. A loss of $4 million d. A gain of $4 million e. A loss of $3 million

Answers

Answer 1
Answer:

Answer:

Loss on bond redemption  = $3 million

Explanation:

Given:

Face value = $15 million

Carrying value = $13 million

Cash paid = $16 million

Find:

Profit / loss

Computation:

Loss on bond redemption  = Carrying value - Cash paid

Loss on bond redemption  = $13 million - $16 million

Loss on bond redemption  = $3 million
Answer 2
Answer:

The entry to record the retirement will include option E. A loss of $3 million. To understand the calculation see below.

Bond Redemption

We are provided with the information about :

Face value = $15 million

Carrying value = $13 million

Cash paid = $16 million

We need to find profit or loss. The difference between Carrying value and Cash paid is the profit or loss.

Carrying Value - Cash paid

$13 million - $16 million

-$3 million, the answer is negative hence there is loss.

Therefore, the correct option is E. A loss of $3 million.

Learn more about Redemption here:

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Related Questions

AIE Industries plans to purchase a new delivery truck for $250,000. The company has been quoted an annual rate of 6.5 percent with discount interest and a compensating balance of 2 percent.a. How much will AIE have to borrow?b. What is the effective rate on this loan?c. If AIE can convince the bank to remove the compensating balance requirement, what is the effective rate?
You buy a 7 percent, 25-year, $1,000 par value floating rate bond in 1999. By the year 2004, rates on bonds of similar risk are up to 9 percent. What is your one best guess as to the value of the bond
A machine does three setups per production cycle. Each setup takes 20 minutes. The processing time is 0.5 minute. What batch size achieves a capacity of 24 units per hour
Tanya is the night supervisor for a data processing company. She supervises 26 workers who perform routine jobs that require minimal training. Which of the following statements would indicate that Tanya is following the transformational model of leadership?Multiple Choice:O Tanya wants to develop a partnership with his team illustrated by reciprocal influence, mutual trust, respect and liking, and a sense of common fates.O Tanya seeks to motivate employees to pursue organizational goals above their own self-interests.O Tanya likes to provide the guidance and support needed by employees and ties meaningful rewards to completion of objectives.
Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $1.25 coming 3 years from today. The dividend should grow rapidly - at a rate of 21% per year - during Years 4 and 5, but after Year 5, growth should be a constant 8% per year. 1. If the required return on Computech is 18%, what is the value of the stock today?

Which statement is an objection of using the Consumer Price Index (CPI) to measure changes in the cost of living

Answers

Complete Question:

Which of the following is an objection of using the Consumer Price Index (CPI) to measure changes in the cost of living?

A. The calculated inflation rate is only accurate for an individual who purchases all the goods and services in the basket.

B. The inflation rate is always understated due to substitution bias.

Answer:

Consumer Price Index (CPI)

A. The calculated inflation rate is only accurate for an individual who purchases all the goods and services in the basket.

Explanation:

To obtain the Consumer Price Index (CPI), a predetermined basket of consumer goods and services is obtained.  Weights are assigned to the goods according to their relative values in the basket.  The price changes are calculated.  The resulting figures  are averaged to determine the CPI.

Answer:

The calculated inflation rate is only accurate for an individual who purchases all the goods and services in the basket.

Explanation:

Perfect Clean, Inc. provides housekeeping services. The following financial data have been provided.Service Revenue

$80,000

Cleaning Supplies Used

22,000

Wages Expense

19,350

Office Rent Expense

5,150

Depreciation Expense—Machinery

550

Calculate the contribution margin and the contribution margin ratio. (Round your contribution margin to the nearest dollar, and your contribution margin ratio to two decimal places.)

A) $38,650; 48.31% B) $74,850; 93.56%

C) $60,650; 75.81% D) $32,950; 41.19%

Answers

Answer:

A) $38,650; 48.31%

Explanation:

The computation of the contribution margin and the contribution margin ratio is shown below:

Contribution margin = Service Revenue - Cleaning Supplies Used - wages expense

= $80,000 - $22,000 - $19,350

= $38,650

The variable cost is Cleaning Supplies Used + wages expense

And, the contribution margin ratio equals to

= (Contribution margin ÷ sales) × 100

= ($38,650 ÷ $80,000)  × 100

= 48.31%

Ben and Jerry were shareholders of Water Ice Inc., an S corp. On Jan. 1, 1998, Ben owned 40 shares and Jerry owned 60 shares. Ben sold his shares to Joe for $10,000 on March 31, 1998. The corp. reported a $50,000 loss at the end of 1998.How much of the loss is allocated to Joe?
A. $20,000
B. $15,060
C. $12,500
D. $10,000

Answers

Answer: $15,060

Explanation:

From the question, we are informed that Ben and Jerry were shareholders of Water Ice Inc., an S corp. On Jan. 1, 1998, Ben owned 40 shares and Jerry owned 60 shares.

We are further told that Ben sold his shares to Joe for $10,000 on March 31, 1998 and that the corp. reported a $50,000 loss at the end of 1998. The loss that will be allocated to Joe will be:

= $50,000 × 40% × 9/12

= $50,000 × 0.4 × 0.75

= $15,000

The closest figure we have close to that is $15,060 which is option B

Prescott expects to produce 225,000 basic models and 225,000 professional models. Compute the predetermined overhead allocation rates using activity-based costing. How much overhead is allocated to the basic model? To the professional model?Estimated overhead cost / Estimated qty of the allocation base= Predetermined OH Basic Model Professional ModelManufacturing overhead assembly 264800 195200Manufacturing overhead packaging 55200 227700Total manufacturing overhead cost 320000 422900

Answers

Answer and Explanation:

The Calculation of Predetermined OH Rate is shown below:

For Materials Handling, it is

= Estimated Overhead Costs ÷ Estimated allocated base Quantity  

= $54,000 ÷ 96

= $562.50 per part

For Machine Setup, it is

= Estimated Overhead Costs ÷ Estimated allocated base Quantity

= $204,000 ÷ 60

= $3,400 per setup

For Insertion of Parts, it is

= Estimated Overhead Costs ÷ Estimated allocated base Quantity  

= $486,000 ÷ 96

= $5,062.50 per part

Now  

Calculation of allocated OH is

For Basic Model:

Allocated OH is

= $562.50 × 32 + $3,400 × 20 + $5,062.50 × 32

= $248,000

For Professional Model:

Allocated OH is

= $562.50 × 64 + $3,400 × 40 + $5,062.50 × 64

= $496,000

On January 2, 2017, Morey Corp. granted Dean, its president, 20,000 stock appreciation rights for past services. Those rights are exercisable immediately and expire on January 1, 2020.On exercise, Dean is entitled to receive cash for the excess of the stock's market price on the exercise date over the market price on the grant date. Dean did not exercise any of the rights during 2017. The market price of Morey's stock was $30 on January 2, 2017 and $45 on December 31, 2017.As a result of the stock appreciation rights, Morey should recognize compensation expense for 2017 of$300,000.$100,000.$600,000.$0.

Answers

Answer:

$300,000.

Explanation:

The 2017 compensation expense for these stock-appreciation rights equals: (number of shares) x (ending market price - grant-date market price) = 20,000($45 - $30) = $300,000.

The balance sheet of Indian River Electronics Corporation as of December 31, 2017, included 13% bonds having a face amount of $90.3 million. The bonds had been issued in 2010 and had a remaining discount of $3.3 million at December 31, 2017. On January 1, 2018, Indian River Electronics called the bonds before their scheduled maturity at the call price of 102. Required: Prepare the journal entry by Indian River Electronics to record the redemption of the bonds at January 1, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)

Answers

Answer:

Dr  Bonds payable                                      $90,300,000

Dr loss on early redemption of bonds        $5,106,000  

Cr Discounts on bonds payable                                             $3,300,000

Cr Cash                                                                                      $92,106,000

Explanation:

The amount of cash paid to bondholders by calling the bonds is the 102% of the face value of $90.3 million i.e $90.3*102%=$92,106,000

The proceeds would debited to cash while the face value of the bond of $90.3 million would be debited to bonds payable account.

In addition the remaining discount of $3.3 million would credited to discounts on bonds payable account.

The loss or gain on the bond call can then be determined as appropriate.
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