Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 2, 1994, Nast Co, issued 8% bonds with a face amount of $1,000,000 that mature on January 2, 2000. The bonds were issued

image text in transcribed

On January 2, 1994, Nast Co, issued 8% bonds with a face amount of $1,000,000 that mature on January 2, 2000. The bonds were issued to yield 12%, resulting in a discount of $150,000. Nast incorrectly used the straight-line method instead of the effective interest method to amortize the discount. How is the carrying amount of the bonds affected by the error? At At December 31, 2001 January 2, 2007 a. Overstated Understated b. Overstated No effect c. Understated Overstated d. Understated No effect On January 1, 2001, Oak Co. issued 400 of its 8%, $1,000 bonds at 97 plus accrued interest. The bonds are dated October 1, 2000, and mature on October 1, 2010. Interest is payable semiannually on April 1 and October 1. Accrued interest for the period October 1, 2000, to January 1, 2001, amounted to $8,000. On January 1, 2001, what amount should Oak report as bonds payable, net of discount? a. $380,300 b. $388,000. c. $388,300 d. $392,000. . Dunn Trading Stamp Co. records stamp service uvenue and provides for the cost of redemptions in the year stamps are sold to licensees. Dunn's past experience indicates that only 80% of the stamps sold to licensees will be redeemed. Dunn's liability for stamp redemptions was $6,000,000 at December 31, 1995. Additional information for 1996 is as follows: $4,000,000 Stamp service revenue from stamps sold to licensees Cost of redemptions (stamps sold prior to 1/1/96) 2,750,000 If all the stamps sold in 1996 were presented for redemption in 1997, the redemption cost would be $2,250,000. What amount should Dunn report as a liability for stamp redemptions at December 31, 1996? a. $7,250,000 b. $5,500,000 c. $5,050,000 d. $3,250,000 On January 2, 1994, Nast Co, issued 8% bonds with a face amount of $1,000,000 that mature on January 2, 2000. The bonds were issued to yield 12%, resulting in a discount of $150,000. Nast incorrectly used the straight-line method instead of the effective interest method to amortize the discount. How is the carrying amount of the bonds affected by the error? At At December 31, 2001 January 2, 2007 a. Overstated Understated b. Overstated No effect c. Understated Overstated d. Understated No effect On January 1, 2001, Oak Co. issued 400 of its 8%, $1,000 bonds at 97 plus accrued interest. The bonds are dated October 1, 2000, and mature on October 1, 2010. Interest is payable semiannually on April 1 and October 1. Accrued interest for the period October 1, 2000, to January 1, 2001, amounted to $8,000. On January 1, 2001, what amount should Oak report as bonds payable, net of discount? a. $380,300 b. $388,000. c. $388,300 d. $392,000. . Dunn Trading Stamp Co. records stamp service uvenue and provides for the cost of redemptions in the year stamps are sold to licensees. Dunn's past experience indicates that only 80% of the stamps sold to licensees will be redeemed. Dunn's liability for stamp redemptions was $6,000,000 at December 31, 1995. Additional information for 1996 is as follows: $4,000,000 Stamp service revenue from stamps sold to licensees Cost of redemptions (stamps sold prior to 1/1/96) 2,750,000 If all the stamps sold in 1996 were presented for redemption in 1997, the redemption cost would be $2,250,000. What amount should Dunn report as a liability for stamp redemptions at December 31, 1996? a. $7,250,000 b. $5,500,000 c. $5,050,000 d. $3,250,000

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Comprehensive Assurance & Systems Tool

Authors: Laura R. Ingraham, Greg Jenkins

4th Edition

0134790472, 9780134790473

More Books

Students also viewed these Accounting questions

Question

Identify HRM systems, practices, and policies.

Answered: 1 week ago