The 8% bonds payable of waterway Industries had a net carrying amount of $292000
ID: 2529203 • Letter: T
Question
The 8% bonds payable of waterway Industries had a net carrying amount of $2920000 on December 31, 2017, The bonds, which had a face value of $3070000, were issued at a discount to yield 10%. The amortization of the bond discount was recorded under the effective-interest method. Interest was paid on January 1 and July 1 of each year. On July 2, 2018, several years before their maturity, Waterway retired the bonds at 103. The interest payment on July 1, 2018 was made as scheduled. What is the loss that Waterway should record on the early retirement of the bonds on July 2, 2018? Ignore taxes. $197900. O $218900. $239900 $92100Explanation / Answer
SOLUTION
Question - 1
Loss to be recorded = $218,900
Carrying value = $2,920,000 + ($2,920,000 * 5%) - ($3,070,000 * 4%)
= $2,920,000 + $146,000 - $122,800
= $2,943,200
Loss = $2,943,200 - ($3,070,000 * 103%)
= $2,943,200 - $3,162,100
= $218,900
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