1.) Tony Hawk's Adventure (THA) issued callable bonds on January 1, 2012. THA's accountant has projected the following amortization schedule from issuance until maturity
| Date |
Cash Paid |
Interest
Expense |
Increase in Carrying Value |
Carrying Value |
| 1/1/12 |
|
|
|
$370,205 |
| 6/30/12 |
$15,600 |
$18,510 |
$2,910 |
373,115 |
| 12/31/12 |
15,600 |
18,656 |
3,056 |
376,171 |
| 6/30/13 |
15,600 |
18,809 |
3,209 |
379,380 |
| 12/31/13 |
15,600 |
18,969 |
3,369 |
382,749 |
| 6/30/15 |
15,600 |
19,137 |
3,537 |
386,286 |
| 12/31/15 |
15,600 |
19,314 |
3,714 |
390,000 |
THA buys back the bonds for $374,521 immediately after the interest payment on 12/31/12 and retires them. What gain or loss, if any, would THA record on this date?
2.)Discount-Mart issues $19 million in bonds on January 1, 2012. They have a nine-year term and pay interest semiannually. This is the partial bond amortization schedule for the bonds.
| Date |
Cash Paid |
Interest
Expense |
Increase in
Carrying Value |
Carrying
Value |
|
|
|
|
|
| 1/1/12 |
|
|
|
$16,778,978 |
| 6/30/12 |
$760,000 |
$838,949 |
$78,949 |
16,857,927 |
| 12/31/12 |
760,000 |
842,896 |
82,896 |
16,940,823 |
| 6/30/13 |
760,000 |
847,041 |
87,041 |
17,027,864 |
| 12/31/13 |
760,000 |
|
|
|
What is the stated annual rate of interest on the bonds?