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Question 5.
Question :
(TCO D) Hurst, Inc. sold its 8% bonds
with a maturity value of $3,000,000 on August 1, 2009 for $2,946,000.
At the time of the sale, the bonds had 5 years until they reached maturity.
Interest on the bonds is payable semiannually on August 1 and February
1. The bonds are callable at 104 at any time after August 1, 2011. By
October 1, 2011, the market rate of interest has declined and the market
price of Hurst’s bonds has risen to a price of 101. The firm decides to
refund the bonds by selling a new 6% bond issue to mature in 5 years.
Hurst begins to reacquire its 8% bonds in the market and is able to
purchase $500,000 worth at 101. The remainder of the outstanding
bonds is reacquired by exercising the bonds’ call feature. In the final
analysis, how much was the gain or loss experienced by Hurst in
reacquiring its 8% bonds? (Assume the firm used straight-line
amortization.) Show calculations.
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ACCT 551 Week 1 Discussion BE12-2, BE12-3, BE12-7, BE12-6,
BE 12-12, Ex 12-15
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BE12-2 makes us learn that if any legal cost is incurred to defend an
intangible assets it should be added to the book value of intangible asset
and depreciated over its remaining useful life. Book Value is