On January 1 2013 Glover Corporation issued 2 400 000 of

5 year
On January 1, 2013, Glover Corporation issued $2,400,000 of 5-year, 8% bonds at 95. The
bonds pay interest semiannually on July 1 and January 1. By January 1, 2015, the market rate
of interest for bonds of risk similar to those of Glover Corporation had risen. As a result, the
market value of these bonds was $2,000,000 on January 1, 2015-below their carrying value.
Joanna Glover, president of the company, suggests repurchasing all of these bonds in the open
market at the $2,000,000 price. To do so, the company will have to issue $2,000,000 (face
value) of new 10-year, 11% bonds at par. The president asks you, as controller, "What is the
feasibility of my proposed repurchase plan?"InstructionsWith the class divided into groups,
answer the following.(a) What is the carrying value of the outstanding Glover Corporation 5-year
bonds on January 1, 2015? (Assume straight-line amortization.)(b) Prepare the journal entry to
redeem the 5-year bonds on January 1, 2015. Prepare the journal entry to issue the new
10-year bonds.(c) Prepare a short memo to the president in response to her request for advice.
List the economic factors that you believe should be considered for her repurchase
proposal.View Solution:
On January 1 2013 Glover Corporation issued 2 400 000 of 5 year
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