Question
On january 1, 2001, General Machine Co. issued $1,000,000 10 year bonds with a market rate of 10%. Interest are paid annually on 12/31. The
On january 1, 2001, General Machine Co. issued $1,000,000 10 year bonds with a market rate of 10%. Interest are paid annually on 12/31. The coupon rate is 12%. On January 1, 2003, General Machine found itself with a lot of excess cash and it will be best for them to buy back their bonds from the open market and retire them so as to avoid future interst payments. The market interest rate on january 1, 2003 is 8%. Calculate: 1)the cash amount that General Machine has to pay to retire the bond. 2)The book value (i.e., net borrowing) of the bonds on january 1, 2003. (3)The gain/loss from the retirement 4)provide journal entry for the early retirement of bonds.
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