Brown Fashions Inc.'s December 31, 2018 balance sheet showed total common equity of $4,050,000 and 290,000 shares of stock outst
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Answer:
<u>Journal entries:</u>
cash 493,574.88 debit
bonds payable 435,000.00 credit
premium on bp 58,574.88 credit
--to record issuance--
Interest expense 19743
Amortization 6357
cash 26100
--to record Dec 31st, 2020--
Interest expense 19488.72
Amortization 6611.28
cash 26100
--to record June 30th, 2021--
bonds payable 130,500.00 debit
premium on bp 13,681.98 debit
interest expense 17,400.00 debit
gain on redemption 25,081.98 credit
cash 136,500.00 credit
--to record redemption--
premium on BP 4,813.04 debit
interest expense 13,456.96 debit
cash 18,270 credit
-- to record December 31st, 2021--
Explanation:
First, we solve for the proceeds from the bonds payable:
C 26,100 (435,000 x 12% / 2)
time 8 ( 4 years x 2)
yield to maturity 0.04 ( 8% / 2)
PV $175,724.6412
Maturity 435,000.00
time 8.00
rate 0.04
PV 317,850.24
PV c $175,724.6412
PV m $317,850.2392
Total $493,574.8804
We now build the amortization schedule.
We take this value, we multiply by the interest rate and then, solve for amortization and ending carrying value.
<u>To record the redemption:</u>
accrued interest:
435,000 x 0.12 x 4/12 (months from June to oct) = 17,400
premium:
480,606.6 - 435,000 = 45,606.6
proportional of premium:
45,606 / 435,000 x 130,500 = 13.681,98
we now solve for the gain/loss on redemption:
130,500 + 13,681.98 + 17,400 = 161.581,9 value redeem
for cash 136,500
gain on redemption 25.081,98
bonds payable 130,500.00 debit
premium on bp 13,681.98 debit
interest expense 17,400.00 debit
gain on redemption 25,081.98 credit
cash 136,500.00 credit
Now, we solve for Dec 31st, 2021 entry.
bonds payable: 435,000 - 130,500 = 304,500
premium: 45,606 - 13,681.98 = 31.924,02
interest expense:
(304,500 + 31,924.02) x 0.04 = 13,456.96
cash outlay:
304,500 x 0.06 = 18,270
amortization 18,270 - 13,456.96 = 4,813.04
Answer:
Depreciation for
2017 = $2,540
2018 = $10,160
Explanation:
Provided, Total cost of the machine = $77,980
Estimated salvage value = $6,860
Therefore, value to be depreciated = $77,980 - $6,860 = $71,120
Total life of asset = 7 years
Depreciation for the year 2017 = October to December = 3 months
Depreciation for the year 2018 = = $10,160
Under straight line method depreciation is fixed for each year, but in the given case in 2017 the asset is used only for 3 months, thus depreciation will be charged for 3 months only.
Final Answer
Depreciation for
2017 = $2,540
2018 = $10,160