problem 08-07 (algo) you are the manager of a monopolistically competitive firm, and your demand and cost functions are estimate
1 answer:
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Answer:
hello your question has a missing journal entry table attached below is the entry journal table completely filled
Explanation:
Amount of bonds acquired = 40% of original bond
i) Bonds payable = 40% * 1,300,000
= $520000
purchase price of bonds = $520000 * 96% ( FACE VALUE )
= $499200
hence the annual amortization
(bonds payable - purchase price of bonds ) / 10 years - 2 years
(520000 - 499200 ) / 8 = $20800/8 = $2600
ii) premium on bonds payable
$20800 - $2600 = $18200
cash amount = $520000 * 8% = $41600
intra entity expense and income table is attached below
from the table
iii) intra-entity interest expense = $39000 and the
iv) intra-entity interest income = $44200
v) investment in bonds
purchase price of bonds + annual amortization
= $499200 + $2600 = $501800
the book value on bonds as at 1st January 2011
=$1300000 * 105% = $1365000
Premium on bonds as at January 1st 2011
= $1365000 - $1300000 = $65000
amortization of premium as at January 1st 2011
=( ($65000) / 10 years ) * 2 years
= $13000
hence the controlling interest in bonds payable = $540800
vi) gains on retirement bonds
= $540800 - $499200 = $41600
attached below is the journal entry on 31st December 2013
