On January 1, 2012, Kenard Corporation issued $3,000,000, 5-year, 8% bonds at 97. The bonds pay interest
Question:
Mel Garner, president of the company, suggests repurchasing all of these bonds in the open market at the $2,500,000 price. But to do so the company will have to issue $2,500,000 (face value) of new 10-year, 12% bonds at par. The president asks you, as controller, “What is the feasibility of my proposed repurchase plan?”
Instructions
With the class divided into groups, answer the following.
(a) Prepare the journal entry to redeem the 5-year bonds on January 1, 2014. Prepare the journal entry to issue the new 10-year bonds.
(b) Prepare a short memo to the president in response to his request for advice. List the economic factors that you believe should be considered for his repurchase proposal.
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Related Book For
Accounting Tools for Business Decision Making
ISBN: 978-1118128169
5th edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
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