Question

Reporting Issuance and Retirement of Long-Term Debt On the basis of the details of the following...

  1. Reporting Issuance and Retirement of Long-Term Debt

    On the basis of the details of the following bonds payable and related discount accounts, indicate the items to be reported in the Financing Activities section of the A summary of the cash receipts and cash payments for a specific period of time, such as a month or a year.statement of cash flows, assuming no gain or loss on retiring the bonds:

    ACCOUNT Bonds Payable ACCOUNT NO.
    Balance
    Date Item Debit Credit Debit Credit
    Jan. 1 Balance 470,000
    Jan. 2 Retire bonds 94,000 376,000
    June 30 Issue bonds 282,000 658,000
    ACCOUNT Discount on Bond Payable ACCOUNT NO.
    Balance
    Date Item Debit Credit Debit Credit
    Jan. 1 Balance 21,150
    Jan. 2 Retire bonds 7,520 13,630
    June 30 Issue bonds 18,900 32,530
    Dec. 31 Amortize discount 1,630 30,900
    Item Section of Statement of Cash Flows Added or Deducted Amount
    Retire bonds
    • Financing activities section
    • Investing activities section
    • Operating activities section, if indirect method used
    • Separate schedule
    • Added
    • Deducted
    • Report only
    $
    Issue bonds
    • Financing activities section
    • Investing activities section
    • Operating activities section, if indirect method used
    • Separate schedule
    • Added
    • Deducted
    • Report only
    $
    Amortization of discount
    • Financing activities section
    • Investing activities section
    • Operating activities section, if indirect method used
    • Separate schedule
    • Added
    • Deducted
    • Report only
    $

Homework Answers

Answer #1

Solution

Item Section of Statement of Cash Flows Added or Deducted Amount
Retire bonds Financing activities section Deducted $    86,480.00
Issue bonds Financing activities section Added $ 263,100.00
Amortization of discount Operating activities section, if indirect method used Added $      1,630.00

When bonds are retired without any gain or loss then it means the bonds are retired at their actual Carrying value.

In above case carrying value of bonds retired is $86480. (94000-7520=$86480)

The bonds issued are issued at discount so the cash received is Bonds payable - Discount on bonds at issue.(282000-18900=$263100)

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