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Chapter 14: Q9BE. (page 754)
On January 1, 2017, Henderson Corporation redeemed \(500,00 of bonds at 99. At the time of redemption, the unamortized premium was \)15,000. Prepare the corporation鈥檚 journal entry to record the reacquisition of the bonds.
The amount of gain on redemption of bonds is $20,000.
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E14-3 (L01) (Entries for Bond Transactions) Presented below are two independent situations.
1. On January 1, 2017, Simon Company issued \(200,000 of 9%, 10-year bonds at par. Interest is payable quarterly on April 1, July 1, October 1, andJanuary 1.
2. On June 1, 2017, Garfunkel Company issued \)100,000 of 12%, 10-year bonds dated January 1 at par plus accrued interest. Interest is payable semi-annually on July 1 and January 1.
Instructions
For each of these two independent situations, prepare journal entries to record the following.
(a) The issuance of the bonds.
(b) The payment of interest on July 1.
(c) The accrual of interest on December 31.
(Equity Securities Entries) On December 21, 2017, Bucky Katt Company provided you with the following information
regarding its equity investments.
December 31, 2017
Investments Cost Fair Value Unrealized Gain (Loss)
Clemson Corp. stock \(20,000 \)19,000 \((1,000)
Colorado Co. stock 10,000 9,000 (1,000)
Buffaloes Co. stock 20,000 20,600 600
Total of portfolio \)50,000 \(48,600 (1,400)
Previous fair value adjustment balance 鈥�0鈥�
Fair value adjustment鈥擟r. \)(1,400)
During 2018, Colorado Co. stock was sold for \(9,400. The fair value of the stock on December 31, 2018, was Clemson Corp.
stock鈥擻)19,100; Buffaloes Co. stock鈥�$20,500. None of the equity investments result in significant influence.
Instructions
(a) Prepare the adjusting journal entry needed on December 31, 2017.
(b) Prepare the journal entry to record the sale of the Colorado Co. stock during 2018.
(c) Prepare the adjusting journal entry needed on December 31, 2018.
The following article appeared in the Wall Street Journal.
Bond Markets
Giant Commonwealth Edison Issue Hits Resale Market With \(70 Million Left Over
New york鈥擟ommonwealth Edison Co.鈥檚 slow-selling new 91 /4% bonds were tossed onto the resale market at a reduced price with about \)70 million still available from the \(200 million offered Thursday, dealers said.
The Chicago utility鈥檚 bonds, rated double-A by Moody鈥檚 and double-A-minus by Standard & Poor鈥檚, originally had been priced at 99.803, to yield 9.3% in 5 years. They were marked down yesterday the equivalent of about \)5.50 for each $1,000 face amount, to about 99.25, where their yield jumped to 9.45%.
Instructions
What are the types of situations that result in troubled debt?
(b) What type of concessions might a creditor grant the debtor in a troubled-debt situation?
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