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madreJ [45]
3 years ago
11

On January 1, 2021, Tiny Tim Industries had outstanding $1,000,000 of 9% bonds with a book value of $970,500. The indenture spec

ified a call price of $987,000. The bonds were issued previously at a price to yield 11% and interest payable semi-annually on July 1 and January 1. Tiny Tim called the bonds (retired them) on July 1, 2021. What is the amount of the loss on early extinguishment?
Business
1 answer:
nevsk [136]3 years ago
6 0

Answer:

loss at extinguishment 8,122.50 dollars

Explanation:

we should compare the amount we pay for the bonds and the book value of the bonds:

book value   978,877.50*

call price   <u>   (987,000.00)  </u>

loss                    (8,122.50)

*We are given with the value at January 1st we must adjust for the value at july 1st using effective-rate method

970,500 x 11%/2 = 53,377.5 interest expense

1,000,000 x 9%/2 = 45,000 cash outlay

amortization               8,377.5

<em><u /></em>

<em><u>carrying value:</u></em>

970,500 + 8,377.5 = 978,877.5

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In the last few decades, the female incarceration rate has grown ____%.
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How are prices determined in a free market economy​
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Incentive Corporation was authorized to issue 12,000 shares of common stock, each with a $1 par value. During its first year, th
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Answer:

Incentive Corporation

A. Assets = Liabilities + Stockholders’ Equity

a. Assets (Cash +$129,600 )= Liabilities + Stockholders' Equity (Common stock +$5,400 and Additional Paid-in Capital $1124,200)

b.  Assets (Cash +$37,800 )= Liabilities + Stockholders' Equity (Common stock +$1,400 and Additional Paid-in Capital $36,400)

B. Journal Entries:

Debit Cash $129,600

Credit Common stock $5,400

Credit APIC $124,200

To record the issuance of 5,400 shares of common stock for cash at $24.

Debit Cash $37,800

Credit Common stock $1,400

Credit APIC $36,400

To record the issuance of 1,400 shares of common stock for cash at $27.

C. Journal Entries:

1. Debit Cash $107,100

Credit Common stock $10,200

Credit APIC $96,900

To record the issuance of 5,100 common stock shares with $2 par value  for $21 per share.

2. Debit Cash $26,400

Credit Common Stock $2,200

Credit APIC $24,200

To record the issuance of 1,100 common stock shares with $2 par value for $24 per share.

3. Stockholders' Equity

INCENTIVE CORPORATION

Balance Sheet (Partial)

At December 31

Stockholders’ Equity

Contributed Capital:

Common Stock                       $6,200

Additional Paid-in Capital       121,100

Total Contributed Capital   $127,300

Net income                                  200

Total Stockholders’ Equity $127,500

4. The maximum amount of cash dividends that Incentive Corporation can declare and distribute is $200, despite having $49,000 in the bank account.

Explanation:

a) Data and Calculations:

Authorized shares, 12,000 of common stock at $1 par value

Net income at year-end = $200

Cash balance at bank = $49,000

Transactions:

Cash $129,600 Common stock $5,400 APIC $124,200

Cash $37,800 Common stock $1,400 APIC $36,400

b) Transactions:

1. Cash $107,100 Common stock $10,200 APIC $96,900

2. Cash $26,400 Common Stock $2,200 APIC $24,200

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