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bp22601
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Joined: 14 Sep 2011
Online Status: Offline
Posts: 2

Posted: 14 Sep 2011 at 09:33 \| IP Logged

on 1/1/04, ABC company issues $100,000 face value, 10% bonds to yield 8%. The bonds are dated 1/1/04, pay interest each 7/1 and 1/1, and mature on 1/1/14. Assume firms have 12/31 fiscal year end.

Assume on 4/1/06 that 75% of the bonds are repurchased on the open market at 101 INCLUDING accrued interest and retired. Assume ABC company uses the effective interest method of amortization record the repurchase/retirement

This is what i have for the amortization table http://i.imgur.com/FaTDy.png (ignore number 4 on the bottom)

Okay so i think i've started on the entries and these might be right but i need someone to look over them.

4/1/06

Debit int exp 1674.78
Debit Premium on bonds 200.22
Credit Interest payable 1875

and another entry would be

Debit Bonds payable 75,000?
Debit Premium on BP 8,539?
Debit Interest payable 1,875?
Credit Cash
Credit Gain on retirement

I'm not sure what to put for the credits... I've been struggling with this one.

Is this right? I have no clue what the amounts will be.. can anyone walk me through this? Thanks!

astone
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Joined: 23 Mar 2011
Location: United States
Online Status: Offline
Posts: 91

Posted: 14 Sep 2011 at 20:26 \| IP Logged

	Total	75%
Reacquisition Price:	101,000.00	75,750.00
Face:	100,000.00	75,000.00

Total Premium	13,590.33	10,192.75
Amortization 04.01.06	2,204.98	1,653.74
Unamortized Premium:	11,385.35	8,539.01
Face + Unamortized	111,385.35	83,539.01
Gain		(7,789.01)

Journal Entry:

DB Bond interest expense 1,674.78

DB Premium on bonds payable 200.22

CR Cash 1,875.00

DB Bonds Payable 75,000.00

DB Premium on Bonds Payable 8,539.01

CR Cash 75,750.00

CR Gain on Extinguishment 7,789.01

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