How much will appling''s earnings be increased

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Reference no: EM13111208

Early extinguishment; effective interest ? LO5

The long-term liability section of Twin Digital Corporation's balance sheet as of December 31, 2010, included 12% bonds having a face amount of $20 million and a remaining discount of $1 million. Disclosure notes indicate the bonds were issued to yield 14%.
Interest expense is recorded at the effective interest rate and paid on January 1 and July 1 of each year. On July 1, 2011, Twin Digital retired the bonds at 102 ($20.4 million) before their scheduled maturity.
Required:
1. Prepare the journal entry by Twin Digital to record the semiannual interest on July 1, 2011.
2. Prepare the journal entry by Twin Digital to record the redemption of the bonds on July 1, 2011.

P 14-21 Report bonds at fair value; quarterly reporting ? LO6

Appling Enterprises issued 8% bonds with a face amount of $400,000 on January 1, 2011. The bonds sold for $331,364 and mature in 2030 (20 years). For bonds of similar risk and maturity the market yield was 10%. Interest is paid semiannually on June 30 and December 31. Appling determines interest expense at the effective rate. Appling elected the option to report these bonds at their fair value. The fair values of the bonds at the end of each quarter during 2011 as determined by their market values in the over-the-counter market were the following:
March 31
$350,000

June 30
340,000

September 30
335,000

December 31
342,000

Required:
1. By how much will Appling's earnings be increased or decreased by the bonds (ignoring taxes) in the March 31 quarterly financial statements?
2. By how much will Appling's earnings be increased or decreased by the bonds (ignoring taxes) in the June 30 quarterly financial statements?
3. By how much will Appling's earnings be increased or decreased by the bonds (ignoring taxes) in the September 30 quarterly financial statements?
4. By how much will Appling's earnings be increased or decreased by the bonds (ignoring taxes) in the December 31 annual financial statements?

Attachment:- cstephenson_wk4problems.xlsx

Reference no: EM13111208

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