Elmira,Inc

question 139

Essay

Elmira,Inc.had $20,000,000 of callable bonds outstanding on December 31,2016.The ten-year bonds were issued on January 1,2010 for $21,100,000 and incurred $100,000 in bond issue costs.Acme can call the bonds at 102 anytime after January 1,2016.The company uses straight-line amortization for bond issue costs and bond premium.Acme decides to call the bonds on January 2,2017.
Required:
1.Compute the gain or loss on early extinguishment of debt.
2.Prepare the journal entry to record the debt extinguishment.

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Definitions:

Traditional Costing Method

An accounting strategy that allocates overhead costs to products based on a predetermined rate, without considering the actual activities that incur costs.

Unit Product Cost

The calculated expense for producing a single unit, taking into account all costs of production from raw materials to finished goods.

Unit Product Cost

The total cost, including materials, labor, and overhead, to produce a single unit of a product.

Activity-Based Costing

Activity-based costing is a method of assigning indirect costs to products and services based on the activities they require.