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storchak [24]
2 years ago
5

The balance sheet of Indian River Electronics Corporation as of December 31, 2017, included 12.25% bonds having a face amount of

$90 million. The bonds had been issued in 2010 and had a remaining discount of $3 million at December 31, 2017. On January 1, 2018, Indian River Electronics called the bonds before their scheduled maturity at the call price of 102. How much gain or loss would Indian River Electronics Corporation recognize on the early extinguishment of the bonds?
Business
1 answer:
ch4aika [34]2 years ago
4 0

Answer:

Loss on the early extinguishment of the bonds = $4,800,000

Explanation:

Early extinguishment of the bonds occurs when the bonds issuer recalls the bonds before the maturity date. This usually happens when the market rate of the bonds falls below the rate being paid by the issuer.

Cash paid on the bonds = Face value x 102%

Cash paid on the bonds = $90,000,000 x 102%

Cash paid on the bonds = $91,800,000

Gain or loss on the early extinguishment of the bonds = Cash paid + Discounts on bonds payable - Bonds payable

Loss on the early extinguishment of the bonds = $91,800,000 + $3,000,000 - $90,000,000

Therefore, the loss on the early extinguishment of the bonds = $4,800,000

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My answer is: Produce Product C first, then followed by Product A. to maximize contribution margin. Product B will not be produced since the maximum number of pounds has already been used in producing Products C and A.

<span> <span> </span><span><span> PER UNIT
</span> <span> PRODUCT                              A               B                C
</span> <span> SELLING PRICE                   80              62                81
</span> <span> VARIABLE EXPENSES
</span> <span> DIRECT MATERIALS            24             18                  9
</span> <span> OTHER VAR EXP.                 24             25.4             43.65
</span> <span> TOTAL VAR EXP                   48             43.4             52.65
</span> <span> CONTRIBUTION MARGIN    32             18.6             28.35
</span> <span> <span>CM RATIO </span>                            0.4             0.3                0.35
</span> <span> </span> <span>
COMPANY CAN SELL 800 UNITS OF EACH PRODUCT PER MONTH.
</span> <span> SAME RAW MATERIAL IS USED IN EACH PRODUCT.
</span> <span> MATERIAL COSTS 3 PER POUND W/ A MAX OF 5,000 POUNDS EACH MONTH
</span> <span> </span> <span>
PRODUCT      DM     <span>UNIT COST </span>        NO. OF LBS
</span> <span> A                      24            3                             8
</span> <span> B                      18            3                             6
</span> <span> C                        9            3                             3
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</span> <span> A                       8                                800                    6400
</span> <span> B                       6                                800                    4800
</span> <span> C                       3                                800                    2400
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</span></span></span><span> <span> </span><span><span> <span>required: </span>
</span> <span> <span>1. calculate the contribution margin per pound of the constraining resource for each product. </span>
</span> <span> 2. which orders would you advise the company to accept first, those for a, b, or c? which orders second? third?
</span> <span> </span> <span>
</span></span></span><span>PLS. SEE ATTACHMENTS FOR MY FULL COMPUTATIONS. </span>

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3 years ago
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