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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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VladimirAG [237]

Answer:

$739.72 ≈  739.72

Explanation:

we can use an excel spreadsheet and the present value function to calculate the expected price of each bond ⇒ =PV(rate,nper,pmt,fv,[type])

  • fv = $1,000
  • pmt = $1,000 x 7.25% x 1/2 = $36.25
  • nper = 60
  • rate = 10% / 2 = 5%
  • present value = ?

=PV(5%,60,36.25,1000) = -739.72 since excel calculates the initial investment, it is always negative, so we just change the sign.

6 0
3 years ago
A market system tends to restrict business risk to owners and investors. This results in which of the following benefits?
In-s [12.5K]

Answer: d)Firms have to pay more to attract inputs, as these inputs have to share the risk.

Explanation: When the market system tries to put restriction on the business risk to owner and other investors , the firms have to give more payment to attract them to market business.

The chances of risk have have to be shared by both the parties so the owners or investors are going to indulge in the business when they gain some benefit e.g.-more payment.

Other options are incorrect because entrepreneurship will not be encouraged through this process. Incomes will not be distributed equally and neither the prudent risk management will be aimed.Thus, the correct option is option(d).

7 0
2 years ago
A manufacturing firm has an annual demand of 300,000 units. Using its current operation, the firm pays $800,000 in annual fixed
Elodia [21]

Answer:

It is cheaper to make the units in-house by $300,000.-

Explanation:

<u>First, we need to calculate the total avoidable production costs of making 300,000 units:</u>

Total variable cost= 300,000*15= $4,500,000

Total avoidable fixed cost= 800,000 - 200,000= $600,000

Total production cost= $5,100,000

<u>Now, the total differential cost of buying:</u>

<u></u>

Cost of buying= 300,000*18= $5,400,000

It is cheaper to make the units in-house.

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3 years ago
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alisha [4.7K]

Answer:Hello i’m figuring this question out for you

Explanation:

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3 years ago
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MA_775_DIABLO [31]

Answer:

The correct answer is:

professional associations-American Bar Association

public-sector groups-National League of Cities

public interest groups-Natural Resources Defense Council

labor groups-AFL-CIO

economic and corporate groups-Independent Petroleum Association of America.

8 0
3 years ago
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