[donnychristal]

I am taking the exam today and I found one confusing area when I reviewed my simulations:

so when there’s a bond issuance cost, we need to subtract it from the cash we received. for example:

DR Cash 82,000

DR Bond issuance cost 2,000

CR Bond payable 80,000

CR Premium on bond payable 4,000

My question is, when calculating the interest expense for the next upcoming period, do you use 84,000 or 82,000 as the base? Becker said you should use the ‘net carrying value’ as the base. There’s also a term ‘net carrying amount’ when we calculate the gain/loss on extinguishment. Are they different?

FAR - 75
AUD - 64/71
BEC - 85

[EuroAddict]

Hope you figured this out before your exam. But you would use the bond payable, 84,000 (BP 80,000 + the premium). The bond issue cost (2,000) will get amortized over the life of the payable separately.

-----------------------------
BEC - 77, 03/2015 (first try)
FAR - 79, 05/2015 (second try)
REG - 83, 12/2015 (first try)
AUD - 84, 03/2015 (first try)

I got 99 problems but the CPA ain't one.

[Author]

Replies