Abbott amortizes the bond discount. It also incurs bond issue costs in preparing and selling the bond

Question:

Abbott amortizes the bond discount. It also incurs bond issue costs in preparing and selling the bond issue. In another, unrelated transaction, dated December 1, Year 5, Abbott issues six-year, $1,000 face value, 9% nonconvertible bonds with detachable stock warrants at an amount exceeding the sum of the face value of the bonds and the fair value of the warrants.

Required:

a. Identify what factors determine that the 11% term bonds are sold at a discount. Explain.

b. Describe how all items related to the 11% term bonds (except cash) are reported/disclosed (1) in a balance sheet prepared immediately after the term bond issue is sold, and (2) for a balance sheet prepared at December 31, Year 5.

c. Identify the period of time over which Abbott amortizes the bond discount.

d. Describe how Abbott should account for the proceeds from sale of the 9% nonconvertible bonds with detachable stock purchase warrants.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Financial Statement Analysis

ISBN: 9780073100234

9th Edition

Authors: John J Wild, K. R. Subramanyam, Robert F. Halsey

Question Posted: