On July 1, 2014 Macklin Corporation issued 5%, 10 year bonds with a face value o

Question

On July 1, 2014 Macklin Corporation issued 5%, 10 year bonds with a face value of $4,000,000 at 104. Interest is part on October 1 and April 1, with any premiums or discounts amortized on a straight-line basis The entry to record toe issuance of toe bonds would be Mann Inc., when owes Doran Co $1,000,000 in notes payable with accrued interest of $90,000, is in financial difficulty. To settle the debt, Doran agrees to accept from Mann equipment with fair value of $1,210,000 an original cost of $1,420,000 and accumulated depreciation of $310,000 Compute the gain or loss to Mann on the settlement of the debt Compute the gain or loss to Mann on the transfer of the equipment Prepare the journal entry on Mann's books to record the settlement of this debt.

Explanation / Answer

3A Dr CR 1-Jul Cash $4,160,000 5% 10-year Bond Payable $4,000,000 Premium on Bond Payable $160,000 (As bonds are issued at premium of $4 so no of shares 4000000/100=40000 and premium is $160000) 4 a) Loss on settlemnet $20,000 b) Equipment Book Value 1110000 Fair value $1,210,000 Net Gain on transfer of equipment $100,000 c) Notes Payable $1,000,000 Accured Interest $90,000 Loss on Settlement $20,000 Equipment $1,110,000

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