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Phantasy [73]
3 years ago
6

The long-term liability section of Rainbow Digital Corporation’s balance sheet as of December 31, 2020, included 10% bonds havin

g a face amount of $1,000,000 and a remaining discount of $139,294. Disclosure notes indicate the bonds were issued to yield 12%. Interest expense is recorded at the effective interest rate and paid on June 30 and December 31 of each year. On July 1, 2021, Rainbow Digital retired the bonds at 101 before their scheduled maturity. What is the amount of gain (loss) on early extinguishment of bonds?
Business
1 answer:
Anon25 [30]3 years ago
4 0

Answer:

Loss on early extinguishment = 1,008,357.64

Explanation:

Data:

T = Interest rate = 10% = 0.10

FA = Face amount = $1,000,000

RD = Remaining Discount = $139,294

Y = Yield rate = 12% = 0.12

RT = Retirement Time = 6/12 = 0.5

BA = Bonds at = 101% = 1.01

EE = Gain (loss) on early extinguishment = ?

IE = Interest Expense = ?

D = Discount on bond payable = ?

Calculations:

IE = Y * (FA - RD) * RT

IE = 0.12 * ($1,000,000 - $139,294) * 0.5 = 0.12 *  $860,706 * 0.5 = $51,642.36

D = FA - [IE - (T * FA * RT)]

D = $1,000,000 - [$51,642.36 - (0.10 * $1,000,000 * 0.5)] = $1,000,000 - [$51,642.36 - $50,000] = $1,000,000 - $1,642.36 = $998,357.64

EE = FA - [D + (FA * BA)]

EE = $1,000,000 - [$998,357.64 + ($1,000,000 * 1.01)] = $1,000,000 - [$998,357.64 + $1,010,000] = $1,000,000 - 2,008,357.64 = -1,008,357.64

EE = -1,008,357.64 (Loss)

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Answer:

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Explanation:

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b) The activities are three for each of introductory and graduate courses.  The cost (annual salary) of the professor is allocated according to the time spent on each activity.  This cost is further allocated between the introductory and graduate classes according to the number of students in each course.  Overall, the same amount per each activity is spent on each student in both courses.

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3 years ago
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This code of conduct enables us to know the organization norms and values as well  what is right and what is wrong which in turn means that it enables us to know the right things to do and thing to to avoid.

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4 0
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