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Sonja [21]
3 years ago
13

Three years ago American Insulation Corporation issued 10%, $800,000, 10-year bonds for $770,000. American Insulation exercised

its call privilege and retired the bonds for $790,000. The corporation uses the straight-line method to determine interest. Prepare the journal entry to record the call of the bonds.
Business
1 answer:
My name is Ann [436]3 years ago
5 0

Answer:

Explanation:

Dr Bond Payable $800,000

Dr Loss on early extinguishment $11,000

     Cr Discount on bonds $21,000 (7/10 x $30,000)

     Cr Cash $790,000

Supporting calculations:

*Unamortized discount calculation:

Face value of the bond 800,000

Less: issue price of the bond 770,000

Discount on bonds payable 30,000 (800,000-770,000)

Amortization of discount on bonds payable per year under straight line method             (30,000/10)  3,000  

Unamortized discount for the remaingg 7 years is 21,000 (7*3,000)

*Loss on early extinguishment calculation:

Face value of the bond 800,000

Less: Unamortized discount for the remaingg 7 years  21,000

Carrying value of the bonds (800,000-21,000) 779,000

Retirement price of the bonds 790,000

Loss on early extinguishment -11,000

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gogolik [260]
I would say be unclean, they cant be unclean
8 0
3 years ago
Omega Inc. expects its net income to be $525,000 this year. The firm's dividend payout ratio is 60 percent. The firm is financed
REY [17]

Answer: $700,000

Explanation: Retained earnings is the amount of earnings left with the company after paying for dividends of common stockholders.

Retained earnings break even can be computed as follows :-

Break\:even=\frac{retained\:earnings}{equity\:ratio}

where,

retained earnings = net income (1- payout ratio)

                              = $525,000 (1 - 60%)

                              =  $210,000

therefore,

Break\:even=\frac{210,000}{0.3}

=$700,000

3 0
3 years ago
At December 31, 2017, Carla Company has outstanding three long-term debt issues. The first is a $2,050,000 note payable which ma
Tatiana [17]

Answer:

At  2018 year end,no debt obligation is due to mature,hence disclosure at 31 December,2017 is zero

At 2019 year end,sinking fund payments and note payable are due, hence  the disclosure in that regard at 31st December 2017 is $4,784,000  

At 2020 year end,bonds and sinking fund payments mature,as a result the disclosed amount is $8,482,000  in respect 31st December 2017 .

At 2021 year end,only sinking fund  is due for payment leading to disclosure of $2,734,000 as at 31st December,2017.

The figures are shown down the line.

Explanation:

Long-term debt is a debt that is repayable in more than a year's time.

Note payable is an agreement between companies issuing the notes and the investors investing in the notes that the amount invested in the notes would be repaid to investors as well as the interests thereon.

Sinking Fund is a fund set aside to redeem debt principal at a specified time in future by putting a specific amount in the sinking fund account at intervals,whose interest and principal would be enough to settle loan obligations.

Years  Requirment                      Workings

2018  $0  

2019 Sinking fund                                   $2,734,000  

2020 Sinking fund and note payable $4,784,000  ($2,050,000 +$2,734,000)

2021 Bond and sinking fund     $8,482,000  ($6,750,000 + $2,734,000)

2022 Sinking Fund                                       $2,734,000  

6 0
3 years ago
broker-dealer based in New York has a Net Capital requirement of $100,000. The broker-dealer also has 2 branch offices in New Je
Lena [83]

Answer:

$100,000

Explanation:

Data provided in the question

Net capital requirement = $100,000

Number of branch offices = 3

Based on the above information

The net capital requirement for this broker-dealer is $100,000. According to the uniform state law refers to the law in which there is uniformity or the same laws to be followed from state to state

Since the net capital is $100,000 so the same is to be considered in case of 3 branches offices as there is an existence of uniformity

3 0
3 years ago
Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of $43,000 and a remain
Nadya [2.5K]

Answer:

Option A  financial disadventage of 21,200

Option B financial advantage of 26,000

The company should go for alternative B

Explanation:

                                       old              A    Differential

Purchase                            -119000 -119,000

Proceeds from sale             53,000       53,000

Variable cost           -134,000    -89,200   44,800

Total                    -134000   -155200 -21,200

                                old               B     Differential

Purchase                               -117000 -117,000

Proceeds from sale               53,000     53,000

Variable cost                -134,000      -44,000   90,000

Total                         -134000     -108000 26,000

<u>Notes:</u>

  • The book value is irrelevant for this question.
  • When going for either alternative we are selling the old machine at their fair value. So we have proceeds from the sale
  • Then the variable cost of the old and each alternative are multiply by 4 becuase, that is the useful life of the machines in year.
  • We add them all and check the difference

Alternative A has a negative differential income, so it is not viable

Alternative B has a positive differential income, it is viable.

5 0
3 years ago
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