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SSSSS [86.1K]
2 years ago
7

On January 1, 2019, Shay Company issues $290,000 of 11%, 20-year bonds. The bonds sell for $282,750. Six years later, on January

1, 2025, Shay retires these bonds by buying them on the open market for $303,050. All interest is accounted for and paid through December 31, 2024, the day before the purchase. The straight-line method is used to amortize any bond discount.
Required:
1. What is the amount of the discount on the bonds at issuance?
2. What is the carrying (book) value of the bonds as of the close of business on December 31, 2024?3. Prepare the journal entry to record the bond retirement.
Business
1 answer:
abruzzese [7]2 years ago
5 0

Answer:

1.

$7,250

2.

$284,562.5

3.

Dr. Bond Payable          $290,000

Dr. Loss on Retirement $18,487.5

Cr. Bond Discount         $5,437.5

Cr. Cash                         $303,050

Explanation:

1.

Bond is issued on the discount when it is issued below the face value.

Discount value = Face value - Issuance value = $290,000 - $282,750 = $7,250

2.

Carrying value of the bond is the net of face value of the bond and un-amortised bond discount.

Carrying value = 290,000 - ($7,250 x (20-5) / 20) = $284,562.5

3.

Bond Discount = $7,250 x 15/20 = $5,437.5

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Answer:

Current Operation (purchase of cookies) - $0.60

Alternative - $0.2 materials

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$0.45 without increasing capacity of which $0.3 is fixed - meaning it would still be incurred at current capacity

                        <u> Mel's Meals Evaluation of Alternatives</u>

                                       Purchase                                Produce

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Materials                               -                                             0.2

Direct Labor                         -                                             0.15

Overhead (Variable)            -                                             0.15

Total Cost                            0.6                                          0.5

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The differential cost in this instance is $0.1 as Mel's saves that for every cookie made which multiplied by the number included in the box and by the total box prepared and sold gives = 0.1 * 2 * 10000 = $2,000 saved for making

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